MEMORANDUM OPINION1

JAMES BROWNING, District Judge.

THIS MATTER comes before the Court on the Plaintiff's Omnibus Motion of (i) Leave to Amend the Consolidated Class Action Complaint and (ii) For Reconsideration of the Court's January 27, 2010 Memorandum Opinion and Orders Granting in Part and Denying in Part Defendant's Motions to Dismiss the Consolidated Amended Complaint, filed July 9, 2010 (Doc. 309)("Motion"). The Court held a hearing on November 3, 2010. The primary issues are: (i) whether the Court should reconsider the Defendants' disclosure obligations under the abstain-or-disclose doctrine and Item 303 of Regulation S-K, 17 C.F.R. § 229.303; (ii) whether the Court should reconsider its decision that Defendant Thornburg Mortgage, Inc.'s ("TMI's") 2007 Form 10-K Report was not actionable; (iii) whether the Court should reconsider its decision that certain of the Defendants' statement were inactionable puffery; (iv) whether the Court should reconsider dismissing the Plaintiffs' claims under Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), against Defendants Garrett Thornburg and Joseph H. Badal; (v) whether the Court should reconsider reserving ruling on the dismissal of the Plaintiffs' claims under Sections 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), against Defendants Larry A. Goldstone, Clarence D. Simmons, and Paul G. Decoff; and (vi) whether the Court should give the Plaintiffs leave to file their Second Amended Complaint ("SAC"), which is attached to their Motion. See Doc. 309-1. After carefully considering the parties' arguments, the Court concludes that: (i) it will reconsider the Defendants' disclosure obligations under the abstain-or-disclose doctrine and Item 303, but that the Defendants' disclosure duties thereunder do not alter that Court's holdings; (ii) the Court will not change its decision that TMI's 2007 Form 10-K was not actionable, because the Plaintiffs present no new law or facts to support their request for a different decision on this matter; (iii) the Court will not alter its decision that certain of the Defendants' statements were inactionable puffery, because the Plaintiffs again present no new law or facts to support their request for a different decision on this matter; (iv) the Court will not change its decision dismissing the Plaintiffs' Section 10(b) claims against Thornburg and Badal, because the disclosure duties under the abstain-or-disclose rule and Item 303 do not alter the Court's analysis; (v) the Court will reconsider reserving ruling on the dismissal of the Plaintiffs' Section 20(a) claims against Goldstone, Simmons, and Decoff, dismissing the Plaintiffs' claims against Decoff, but not dismissing the Plaintiffs' claims against Goldstone and Simmons; and (vi) the Court grants the Plaintiffs' leave to file their SAC, because the SAC cures deficiencies in the Plaintiffs' allegations establishing Section 20(a) liability against Thornburg.

FACTUAL BACKGROUND2

The Plaintiffs' Consolidated Class Action Complaint, filed May 27, 2008 (Doc. 68) ("CCAC") and SAC, describe a series of public statements and filings dating back to early 2006 that the Plaintiffs assert contain fraudulent material misrepresentations. The Plaintiffs also contend that the Defendants' public statements and filings contain material omissions. The Court draws the following statement of facts from the well-pleaded, non-conclusory allegations of the CCAC, as the Court must when deciding or reconsidering a motion to dismiss filed under rule 12(b)(6) of the Federal Rules of Civil Procedure. Where relevant, the Court includes information from TMI's Securities and Exchange Commission ("SEC") filings to which Plaintiffs refer in their CCAC. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) ("[C]ourts must consider the complaint in its entirety, as well as other sources . . ., in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice."); Litwin v. Blackstone Group, L.P., 634 F.3d 706, 708 (2d Cir.2011) ("[W]e include information from [SEC] filings by the Blackstone Group, L.P. . . . to which plaintiffs refer in their complaint, particularly the Form S-1 Registration Statement . . . and Prospectus filed by Blackstone in connection with its June 21, 2007 initial public offering. . . ."); ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) ("[W]e may consider . . . legally required public disclosure documents filed with the SEC, and documents possessed by or known to the plaintiff and upon which it relied in bringing the suit.").

1. The Parties.

This consolidated action is brought by Lead Plaintiffs (i) W. Allen Gage, individually and on behalf of J. David Wrather; (ii) Harry Rhodes; (iii) FFF Investments, LLC; (iv) Robert Ippolito, individually and as Trustee for the Family Limited Partnership Trust; (v) Nicholas F. Aldrich, Sr., individually and on behalf of the Aldrich Family; (vi) Betty L. Manning; (vii) John Learch; and (viii) Boilermakers Lodge 154 Retirement Plan ("Boilermakers Lodge") (collectively "the Plaintiffs"). The Plaintiffs all purchased shares of TMI stock during the Class Period3 at prices that they allege were artificially inflated. They assert that they were damaged as a result of these inflated-price purchases. See CCAC ¶ 53, at 15-16. Manning acquired 550 shares of TMI common stock during the May 2007 Offering. See CCAC ¶ 54, at 16. She bought them on May 4, 2007 and paid $27.05 per share. See CCAC ¶ 54, at 16. Learch, as trustee for the Learch trust, acquired 400 shares of 7.5% Series E Cumulative Convertible Redeemable Preferred Stock in the June 2007 Offering. See CCAC ¶ 55, at 16. He bought his shares on June 19, 2007 and paid $25.00 per share. See CCAC ¶ 55, at 16. Boilermakers Lodge purchased TMI stock during the September 2007 Offering. See Plaintiffs' Opposed Motion for Leave to Amend Consolidated Class Action Complaint to Add Additional Representative Plaintiff ¶ 5, at 4, filed January 27, 2009 (Doc. 160). No particular Plaintiff alleges to have purchased any TMI stock in the January 2008 offerings.

TMI, a Defendant whose securities are at the heart of this action, is a publicly traded residential-mortgage lender that represents that it focuses primarily on the "jumbo" and "super-jumbo" segment, i.e., loans totaling over $417,000.00, of the adjustable-rate mortgage ("ARM") market.4 CCAC ¶ 5, at 2. In essence, TMI generates business by loaning and borrowing money, and charging a higher interest rate on the money that it loans to others than its sources charge it on the money that it borrows. See CCAC ¶ 5, at 2-3. As the Plaintiffs put it, "[TMI] generates income from the small, net spread between the interest income it earns on its assets and the cost of its borrowings." CCAC ¶ 5, at 2-3. TMI was formed under the laws of the State of Maryland and has its principal place of business in Santa Fe, New Mexico. See CCAC ¶ 57, at 16. At all relevant times, TMI's securities have been traded on the New York Stock Exchange ("NYSE") under the symbol "TMA." CCAC ¶ 57, at 16. For federal income tax purposes, TMI is classified as a Real Estate Investment Trust.

There are nine Defendants who underwrote TMI's public offerings: (i) AG Edwards & Sons, Inc.; (ii) BB & T Capital Markets; (iii) UBS Securities, LLC; (iv) Citigroup Global Markets, Inc.; (v) Friedman, Billings, Ramsey & Co., Inc. ("FBR"); (vi) Oppenheimer & Company, Inc.; (vii) RBC Dain Rauscher Corp.; (viii) Stifel, Nicolaus & Company, Inc. ("SNC"); and (ix) Bear, Stearns & Co., Inc. The Court will refer to them as "the Underwriter Defendants." These Defendants are all underwriters of TMI's public offerings—in other words, these Defendants each bought TMI stock and sold that stock to other investors, implementing TMI's public offerings. Citibank, AG Edwards, and SNC underwrote the May 2007 offering, see CCAC ¶ 532, at 163; SNC, AG Edwards, RBC, BB & T, and Oppenheimer underwrote the June 2007 offering, see CCAC ¶ 535, at 164; FBR underwrote the September 2007 offering, see CCAC ¶ 538, at 164; and FBR, UBS, Bear Stearns, and SNC all underwrote the February 2008 offering, see CCAC ¶ 541, at 165.

There are also twelve individuals named as Defendants in this action. Thornburg was TMI's founder. See CCAC ¶ 58, at 17. At all relevant times, he served as Chairman of the Board of Directors and, until December 18, 2007, acted as Chief Executive Officer. See id. Goldstone has served as President, Chief Operating Officer, and a director since June 1993. See id. ¶ 59, at 17. Goldstone became CEO on December 18, 2007. See id. Badal served as a director, the Chief Lending Officer, and Executive Vice President until his retirement on December 31, 2007. See id. ¶ 60, at 17. Decoff has served as Senior Executive Vice President and Chief Lending Officer since January 1, 2008. See id. ¶ 61, at 17. Simmons has served as Senior Executive Vice President since March 2005, and Chief Financial Officer since April 2005. See id. ¶ 62, at 17-18. The Court will refer to these Defendants— TMI, Thornburg, Goldstone, Simmons, Badal, and Decoff—as "the Individual Defendants." The CCAC describes the remaining individual Defendants, Anderson, Ater, Cutler, Kalangis, Lopez, Mullin and Sherman ("the Director Defendants") only as directors during the Class Period. See CCAC ¶¶ 522-28, at 162-63. When discussing all Defendants, the Court will refer to them collectively as "the Defendants."

2. The Claims.

This federal-securities class action sets forth claims under the Securities Act of 1933, 15 U.S.C. §§ 77a to 77aa ("Securities Act") and under the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a to 78oo ("Exchange Act"). The Plaintiffs allege that "certain defendants acted knowingly or with recklessness in issuing materially false or misleading statements and/or failing to disclose facts concerning [TMI]'s business and financial condition between April 19, 2007 and March 19, 2008, inclusive." CCAC ¶ 2, at 1-2. Thus, the Plaintiffs assert, the Defendants are liable for violations of Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), respectively, and Sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 77l(a)(2), and 77o, respectively. The Plaintiffs assert that the Underwriter Defendants are liable for violations of Sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 77l(a)(2), and 77o. See CCAC ¶¶ 598-620, at 181-86.

3. The Condition of the Housing Market in 2006-2007.

In 2006 and 2007, real-estate values began to falter, resulting in an increased rate of mortgage defaults. See CCAC ¶¶ 92-93, 96, at 27-29. As a result, by early 2007, the market for Alt-A5 mortgages, mortgage-backed securities ("MBSs"),6 and asset-backed commercial paper ("ABCP")7 shrunk. See CCAC ¶¶ 100-03, at 30-31. The result, according to the Plaintiffs, was three-fold: (i) reduced demand for Alt-A MBSs; (ii) increased cost of obtaining capital; and (iii) decreased revenues from ARM mortgages. See Plaintiffs' Opposition to Defendants' Motion to Dismiss Consolidated Amended Complaint Filed by Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Anne-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangus, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman at 7, filed December 22, 2008 (Docs. 154, 155, 156, 157)("1934 Act Response")(citing CCAC ¶¶ 13, 129-33, at 5, 38-39). Large mortgage lenders began to announce staggering losses coupled with a bleak outlook for the future. See CCAC ¶¶ 13, 96-103, at 5, 29-31. TMI, however, continued to deny that the deteriorating mortgage market was affecting it, appearing to report that its superior underwriting standards insulated it from such effects. See CCAC ¶¶ 79, 213-14, at 24, 63.

4. Problems for TMI.

According to the Plaintiffs, to show profitability, TMI must continuously increase the totals on its balance sheet by buying and originating mortgage-backed assets. See CCAC ¶ 5, at 3. This business model requires TMI to have continuous access to capital. See CCAC ¶ 5, at 3. TMI has, historically, acquired capital through public offerings of its securities, short-term borrowings—including reverse repurchase agreements ("RPAs")8—the issuance of asset-backed commercial paper ("ABCP"), and the issuance of collateralized-debt obligations ("CDOs").9 See CCAC ¶ 6, at 3. TMI was "heavily leveraged"—meaning that it borrowed a large amount of money compared to the amount of money available to it. For example, depository banks are subject to Federal Reserve rules, which mandate ten percent cash reserves—for every $10.00 of money that the bank lends to outside sources, it must retain $1.00 of actual cash available at all times. See CCAC ¶ 7, at 3. TMI's internal policy allows it to borrow $12.50 for every $1.00 it holds in equity—an eight-percent equity-reserve position. See CCAC ¶ 7, at 3. Throughout the Class Period, beginning in December 2006, analysts asked TMI whether its limited equity provided sufficient insurance against a real-estate market downturn. See CCAC ¶ 82, at 24.

In the face of this inquiry, TMI recognized the potential risk of the real-estate market going south, but repeatedly reassured analysts and its investors that its liquidity position-its ability to satisfy debt obligations as they arise-was not at risk. See CCAC ¶¶ 7, 82, at 3, 24-25. As late as July 20, 2007, TMI reported that its unencumbered assets securing its highly leveraged financing were at their highest level "in the history of the organization." CCAC ¶ 7, at 3.

CCAC ¶ 83, at 25 (emphasis in CCAC).

TMI repeatedly stated in its filings with the SEC that its focus was to acquire and originate high quality, highly liquid mortgage assets such that sufficient assets could be readily converted to cash, if necessary, to meet its financial obligations. See CCAC ¶ 9, at 4. The Defendants-or, at least Goldstone—stated throughout the Class Period that TMI was "exclusively" focused on the "prime" loan mortgage market, which is characterized by loans made to borrowers with a credit score above 620, a debt-to-income ratio no greater than seventy-five percent, and a combined loan-to-value ratio of ninety percent. CCAC ¶ 10, at 4.

TMI's highest-ranking executives repeatedly denied that TMI originated lower-quality "subprime"10 or Alt-A loans, and, as a result, represented that TMI's asset base and earnings potential were not financially exposed to the decline in the subprime and Alt-A mortgage markets. CCAC ¶ 11, at 4. "Alt-A loans are `alternatives' to the gold standard of conforming, GSE-backed mortgages. Often an Alt-A borrower is unable to provide the proof of income or the verification of assets necessary to obtain a prime mortgage, but has a satisfactory credit score, or vice versa." CCAC ¶ 98, at 29. "In other words, Alt-A or `alternative' loans are associated with and defined by a higher level of risk than prime loans due to a borrower's inability to provide these fundamental guarantees." CCAC ¶ 98, at 29. See CCAC ¶ 11, at 4. TMI's multi-billion dollar asset portfolio during the Class Period was comprised of various mortgage-related assets. See CCAC ¶ 12, at 4. TMI's mortgage-based holdings include both loans it originates, and loans it acquires or purchases. See CCAC ¶ 12, at 4-5. TMI also purchased MBSs, which it frequently posted as the collateral under its many short-term borrowing agreements. See CCAC ¶ 12, at 4-5. TMI would originate loans, securitize them, and sell off interests in the securitized assets to obtain additional financing. See CCAC ¶ 12, at 4-5.

In 2006 and 2007, as the markets for subprime and Alt-A mortgages began to decline, and subprime and Alt-A borrowers began to default with increased frequency, many mortgage lenders, such as Countrywide, announced that they were experiencing serious financial and operational problems. See CCAC ¶ 13, at 5. The Defendants insisted, however, that TMI's stringent underwriting standards and "high quality" assets insulated it from the market downturn, and, in fact, positioned TMI to benefit from the economic environment. CCAC ¶ 13, at 5. As early as April 2007, however, TMI acknowledged burgeoning concerns with the Alt-A mortgage market, but assured its investors that TMI was different than the typical mortgage company and, thus, shareholders' investments in TMI were safe. See CCAC ¶ 13, at 5. Notwithstanding the Defendants' repeated representations that TMI's focus is on originating prime-rather than subprime or Alt-A-loans, several confidential witnesses with direct knowledge of TMI's internal practices state that TMI originated Alt-A loans during the Class Period.11 See CCAC ¶ 14, at 5-6.

During the Class Period, the inclusion of Alt-A assets in TMI's investment portfolio was adversely affecting its balance sheet by: (i) being illiquid/non-salable; and (ii) declining in value, which triggered margin calls12 from RPA counter-parties on RPAs in which the Alt-A assets were being held as collateral. See CCAC ¶ 15, at 6. Nevertheless, on June 6, 2007, Goldstone stated, during a North America REIT's Investor Forum, that TMI occupied a niche in the mortgage-finance market, focusing "exclusively on prime mortgage loan originations, as opposed to subprime." CCAC ¶ 76, at 22-23. He further stated:

CCAC ¶ 76, at 22-23 (alterations in original). Also, throughout the Class Period, TMI's SEC filings asserted that its assets are concentrated in "prime" and "high quality" ARM securities that meet TMI's "High Quality" criteria. CCAC ¶ 77, at 23. The SEC filings also insisted that TMI's "primary focus is to acquire and originate high quality, highly liquid mortgage assets such that sufficient assets could be readily converted to cash, if necessary, in order to meet our financial obligations." CCAC ¶ 79, at 24.

Notwithstanding these statements, the Defendants—or, at least Goldstone—knew by no later than June of 2007, but did not disclose, that the ABCP market was shrinking rapidly and, by July 2007, had more or less dried up. See CCAC ¶ 15, at 6; id. ¶¶ 131-32, 134, 250, 263, 288, at 38-40, 74-75, 88. Goldstone allegedly admitted this shrinking market to certain confidential sources during a private meeting on August 8, 2007. See CCAC ¶ 15, at 6. Goldstone also reassured the confidential sources that, notwithstanding the problems in the ABCP market, TMI's relationships with its lender banks "were fine." CCAC ¶ 131, at 38-39. Also by July of 2007, the RPA market became an increasingly more costly source of financing as a result, in part, of a combination of declining asset values and the illiquidity of the ABCP market. See CCAC ¶ 16, at 6. After early July, TMI was unable to complete any securitization transaction "based on a lack of buyers in the marketplace." CCAC ¶ 16, at 6.

Notwithstanding these apparent problems, Goldstone made some comments during the July 20, 2007 earnings conference call to the effect that the forces affecting the mortgage market were not a threat to TMI. See CCAC ¶¶ 114, 115, at 34. Goldstone stated that "[TMI is] behaving substantially different than subprime originators because [it is] not that. [It is] not an Alt-A originator. [It is] not—[It is] a prime adjustable rate mortgage originator. . . ." CCAC ¶¶ 114, at 34. Goldstone further stated that "[t]he current credit crisis in the market environment today, the liquidity issues in the marketplace today, are creating a very, very nice opportunity for [TMI]." CCAC ¶ 115, at 34.

On August 14, 2007, TMI advised the market, without any warning, that because of liquidity concerns, it was exploring the potential sale of assets. See CCAC ¶¶ 18, 135, 273-74, at 7, 40, 82. TMI had, however, already begun a sale of assets by August 10, 2007. See CCAC ¶¶ 18, 132, 134-35, 137-38, at 7, 39-40. On August 20, 2007, TMI admitted that it had sold approximately thirty-five percent of its portfolio—$20.5 billion of its highest-rated mortgage-backed assets—to meet margin calls on its RPA agreements and to satisfy maturing ABCP obligations. See id. Furthermore, TMI had sold those assets at a discount-approximately ninety-five percent of their face value. See id. ¶ 265(c), at 79.

On August 14, 2007, the price of TMI common stock fell forty-three percent, from $13.81 per share to $7.89 per share. See CCAC ¶ 20, at 7. Also on that day, a substantial volume of shares—27,293,100— were traded. See CCAC ¶ 20, at 7. Allegedly based on the series of false and misleading statements, TMI was able to obtain hundreds of millions of dollars in its securities offerings. See CCAC ¶ 22, at 8. Specifically, TMI made one stock offering in early September of 2007, in which it raised $500 million in sales. See id. Further, it made two offerings in January of 2008, which gathered an additional $212 million in total proceeds. See CCAC ¶ 22, at 8.

On February 28, 2008, TMI announced in its 2007 Form 10-K Annual Report that it was forced to meet over $300 million in margin calls under its RPAs. See CCAC ¶ 23, at 8. This disclosure was the first time that TMI announced that it owned $2.9 billion in MBSs backed by Alt-A collateral, and that the declining value of its Alt-A-backed MBSs was to blame for the margin calls. Also on February 28, 2008, upon the release of the above information, TMI's common stock dropped in value again-this time fifteen percent, from $11.54 per share to $9.86 per share. See CCAC ¶ 24, at 8. TMI stock traded heavily that day, with 21,012,500 shares changing hands. See CCAC ¶ 24, at 8.

TMI had not, however, met all of its margin-call obligations.13 On February 28, 2008—the same day as the release of TMI's 2007 Form 10-K—JP Morgan Chase notified TMI that TMI had defaulted on a $320 million loan by failing to meet an earlier margin call of $28 million. See CCAC ¶ 25, at 8-9. On March 3, 2008, TMI disclosed via a press release that it had "been subject to additional margin calls of approximately $270 million as of February 29, 2008,"14 and that it was "currently in default with one RPA counterparty." CCAC ¶ 26, 171, at 9, 48. TMI also stated that "the lender had not yet exercised its right to liquidate pledged collateral," which the Plaintiffs assert was false, and TMI also stated that, "to the extent any other RPA contains a cross-default provision, the related lender could declare an event of default at any time," which the Plaintiffs assert was misleading. CCAC ¶ 26, at 9; id. ¶ 372, at 113 (quoting TMI's March 3, 2008 Form 8-K). JP Morgan had already told TMI: (i) that TMI was in default; and (ii) that JP Morgan planned to exercise its rights under the RPA. See CCAC ¶ 27, at 9. Also, TMI did not disclose that all of its RPA agreements included cross-default provisions, meaning that any company with which TMI had an RPA could declare a default event and demand buy-back of the TMI RPAs. See CCAC ¶ 27, at 9.

After that disclosure, TMI's stock price fell yet again. Between February 29, 2009 and March 3, 2009, the price of TMI common stock decreased from $8.90 per share to $4.32 per share-a drop of fifty-one percent. See CCAC ¶ 28, at 9. Over the course of those three days, investors traded 76,858,800 shares of TMI stock. See CCAC ¶ 28, at 9.

On March 4, 2008, TMI's auditor, KPMG, LLP sent TMI a letter informing TMI that it was withdrawing its unqualified audit opinion contained in TMI's Form 10-K for 2007. See CCAC ¶ 29, at 9-10. KPMG stated that, "due to conditions and events that were known or should have been known to the company," the 2006 and 2007 year-end financial statements "contain material misstatements associated with available for sale securities," and that "substantial doubt exists relative to [TMI]'s ability to continue as a going concern." CCAC ¶ 29, at 9-10 (alterations omitted). KPMG demanded that TMI "make appropriate disclosure of the newly discovered facts" and that its previous opinion letter "could no longer be relied upon." CCAC ¶ 29, at 9-10. Only one week earlier, KPMG had issued an unqualified audit opinion for TMI. See CCAC ¶ 30, at 10.

On March 5, 2008, TMI disclosed to its investors that the February 28, 2009 JP Morgan default had triggered cross-defaults in all of TMI's RPAs. See CCAC ¶ 32, at 10. On the same day, the price of TMI's common stock fell again, from $3.40 per share to $1.26 per share—a 54.4% drop. See CCAC ¶ 33, at 10.

On March 6, 2008, TMI received a letter from the NYSE informing TMI that the NYSE had commenced an investigation into transactions in TMI's common stock in January of 2008. See CCAC ¶ 34, at 10-11. The investigation was ostensibly regarding the impact of recent market events in the mortgage industry on TMI's book value. See CCAC ¶ 178, at 51. TMI did not disclose the existence of the letter or the investigation that day. See CCAC ¶ 34, at 11.

On March 7, 2008, TMI disclosed to the public that it received the letter from KPMG and further announced that it would restate its financial statements for 2007-but not for 2006. See CCAC ¶ 35, at 11. TMI stated that the restatement was necessary because of "a significant deterioration of prices of MBS[s], combined with a liquidity position under unprecedented pressure from increased margin calls[,] a portion of which [TMI] has been unable to meet." CCAC ¶ 35, at 11 (alterations omitted). TMI also stated that its restatement would result in a $427.8 million impairment charge15 on its balance sheet to reflect the fact that it may not have the ability to hold certain ARM assets to maturity. See CCAC ¶ 35, at 11. Between March 7, 2008 and March 10, 2008, TMI's stock price fell another thirty-six percent, from $1.08 to $0.69. See CCAC ¶ 37, at 11-12.16 Between March 7, 2008 and March 10, 2008, 34,591,800 shares were traded. See CCAC ¶ 394, at 120.

On March 11, 2008, TMI filed the restatement of its financials. See CCAC ¶ 35, at 11. The impairment charge listed on the restated financial statement was $676.6 million. See CCAC ¶ 35, at 11. The restatement resulted in a $300,000.00 reduction in management fees and a $5.4 million reduction in fourth-quarter performance fees. See CCAC ¶ 35, at 11. The Plaintiffs allege that the restatement reflected an impairment to TMI's asset portfolio as of December 31, 2007 and not as of March, 2008.

Problems continued to pile on TMI. On March 12, 2008, TMI announced that it had defaulted on a $49,000,000.00 RPA with Morgan Stanley, because it could not meet a $9,000,000.00 margin call. See CCAC ¶ 38, at 12. This default allegedly led to a further decrease in TMI's stock price. See CCAC ¶ 38, at 12.

On March 19, 2008, TMI announced that it had entered into a bailout agreement with five of its remaining lenders to obtain approximately $5.8 billion in financing. See CCAC ¶ 39, at 12. Goldstone admitted that the deal would significantly dilute the value of TMI common stock, and that the deal was the only way to "give the company the liquidity and staying power to remain afloat." CCAC ¶ 39, at 12. On the same day, the price of TMI stock fell again. See id. The price per share of TMI common stock dropped fifty percent, from $3.00 per share to $1.50 per share. See CCAC ¶ 39, at 12.17

On April 28, 2008—seven weeks after TMI received the NYSE letter—TMI informed the investing public that the NYSE had commenced an investigation of some of its January 2008 trading. See CCAC ¶ 178, at 51. Likely because April 28, 2008 is outside the Class Period, the Plaintiffs do not attempt to causally tie any particular adverse effect to this disclosure. They emphasize, however, how long it took— seven weeks—for TMI to disclose that the NYSE had commenced this investigation. See CCAC ¶ 178, at 51. During those seven weeks, the Plaintiffs point out, TMI issued nine SEC filings and press releases, and none of them mentioned the investigation. See 1934 Act Response at 10.

5. TMI's Public Offerings and SEC Filings.

The Plaintiffs allege that the Defendants are strictly liable for violations of Sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 77l(a)(2), and 77o, respectively. See CCAC ¶ 40, at 12. The allegations arise out of four events: (i) the May 4, 2007 public offering of 4,500,000 shares of common stock at $27.05 per share, which resulted in gross proceeds of $121.7 million; (ii) the June 19, 2007 public offering of 2,750,000 shares of 7.5% Series E Cumulative Convertible Redeemable Preferred Stock ("Series E Stock") at $25.00 per share, which resulted in gross proceeds of $68,800,000.00; (iii) the September 7, 2007 public offering of 20,000,000 shares of 10% Series F Cumulative Convertible Redeemable Preferred Stock ("Series F Stock") at $25.00 per share, which resulted in gross proceeds of $500 million; and (iv) the January 15, 2008 concurrent public offering of eight million shares of Series F Stock at $19.50 per share, which resulted in gross proceeds of $156 million, and seven million shares of common stock at $8.00 per share, which resulted in gross proceeds of $56,000,000.00. CCAC ¶ 40, at 12. All of these public offerings were made pursuant to a Shelf Registration Statement ("SRS"), filed with the SEC on Form S-3 on May 20, 2005, and a Prospectus that became effective on June 16, 2005. CCAC ¶ 42, at 13. The SRS prospectively incorporates by reference:

CCAC ¶ 42, at 13 (presumably quoting the SRS). Thus, the SRS incorporates by reference certain of the quarterly, annual, and current reports. See CCAC ¶ 42, at 13.

The May 2007 Offering was made pursuant to: (i) the SRS; (ii) a Preliminary Prospectus Supplement filed with the SEC on form 424B5 on May 3, 2007; and (iii) a Prospectus Supplement filed with the SEC on Form 424B2 on May 7, 2007. See CCAC ¶ 43, at 13. The June 2007 Offering was made pursuant to: (i) the SRS; (ii) a Preliminary Prospectus Supplement, filed on Form 424B5 on June 11, 2007; (iii) a Final Term Sheet, filed with the SEC as a Free Writing Prospectus on June 15, 2007; and (iv) a Definitive Prospectus Supplement, filed with the SEC on Form 424B2 on June 18, 2007. See CCAC ¶ 44, at 13-14. The September 2007 Offering was made pursuant to: (i) the SRS; (ii) a Free Writing Prospectus filed with the SEC on August 30, 2007; (iii) a Preliminary Prospectus Supplement dated and filed with the SEC on Form 424B5 on August 30, 2007; (iii) a Final Term Sheet dated August 30, 2007; and (iv) a Prospectus Statement dated August 30, 2007, and filed with the SEC on Form 424B2 on September 4, 2007. See CCAC ¶ 45, at 14. The January 2008 Offerings were made pursuant to: (i) the SRS; (ii) two Preliminary Prospectus Supplements filed on Forms 424B5 on January 9, 2008; and (iii) two Prospectus Supplements filed on Forms 424B2 on January 15, 2008. See CCAC ¶ 46, at 14.

6. How TMI Makes Money.

TMI is not a bank or savings-and-loan institution, but its business purpose, strategy, and methods of operation are very similar to those of banks and savings-and-loans. The primary distinction is that, unlike a bank, TMI finances the purchase and origination of its ARM assets with equity capital, unsecured debt, CDOs, and short-term borrowing, instead of deposits or federal advances. Goldstone, during a November 27, 2007 earnings conference, explained:

CCAC ¶ 72, at 21-22. The Plaintiffs insist that this business model results in a need to continuously acquire capital and increase the magnitude of its balance sheet. See CCAC ¶ 73, at 22. They further insist that the model requires TMI to have ready access to cash to achieve growth and to maintain stability during market downturns. See CCAC ¶ 73, at 22. The composition of TMI's asset portfolio was a significant aspect of its business plan throughout the Class Period. See CCAC ¶ 78, at 23.

TMI acquires cash needed to fund its operation in three primary ways: (i) equity offerings, including selling of preferred and common stock; (ii) short-term borrowing, such as RPAs and ABCP; and (iii) CDOs. See CCAC ¶ 73, at 22. Sale of CDOs were a significant source of funding, but became more difficult to consummate as the mortgage financing market declined during the Class Period, particularly for those securities rated less than AAA. See CCAC ¶ 75, at 22. TMI even encountered difficulties selling its AAA-rated CDOs during the Class Period. See CCAC ¶ 75, at 22.

7. The Plaintiffs' Motive-Based Facts.

Another business entity, Thornburg Mortgage Advisory Corporation ("TMAC"), manages and runs TMI. See CCAC ¶ 193, at 57-58. Thornburg is the CEO of TMAC. See CCAC ¶ 193, at 57-58. Of the other individuals that run TMAC, many are also TMI executives, including Goldstone and Senior Vice Presidents Nathan Fellers and Ann Beckett. See id. TMAC executives18 were paid from management fees that TMAC earned under its Management Agreement with TMI. TMAC's management fee was based on TMI's "Average Historical Equity," i.e., the difference between total assets and total liabilities calculated each month. CCAC ¶ 194, at 58. The Plaintiffs insist that this fee structure provided an incentive to grow the size of TMI's asset base to get more income for TMAC and, therefore, more executive compensation. See CCAC ¶ 194, at 58.19 At least one analyst has concluded that "this management structure could produce a potential conflict of interest between the external manager and shareholders, particularly about the appropriate size of assets during different phases of a business cycle." CCAC ¶ 195, at 58.

PROCEDURAL BACKGROUND

On May 27, 2008, the Plaintiffs filed the CCAC against the Defendants, asserting claims arising under Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 77l(a)(2), and 77o. Specifically, the Plaintiffs asserted: (i) claims against the Individual Defendants for violations of Section 10(b) of the Exchange Act and of Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5; (ii) claims against the Individual Defendants for violations of Section 20(a) of the Exchange Act; (iii) claims against the Individual Defendants, the Underwriter Defendants, and the Director Defendants for violations of Sections 11 and 12(a)(2) of the Securities Act; and (iv) claims against the Individual Defendants for violations of Section 15 of the Securities Act.

On September 22, 2008, the Defendants moved to dismiss all of the Plaintiffs' claims. See Motion to Dismiss Consolidated Amended Complaint by Defendants Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Ann-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman, filed September 22, 2008 (Doc. 126); Opposed Motion by May/June 2007 Underwriter Defendants to Dismiss Consolidated Class Action Complaint; Memorandum of Points and Authorities in Support Thereof, filed September 22, 2008 (Doc. 128); Opposed Motion to Dismiss of Underwriter Defendants UBS Securities LLC and Bear Stearns & Co., Inc., filed September 22, 2008 (Doc. 130); Motion of Friedman, Billings, Ramsey & Co, Inc. to Dismiss and Memorandum of Points and Authorities in Support Thereof, filed September 22, 2008 (Doc. 132). On December 22, 2008, the Plaintiffs filed briefs in opposition to the Defendants' motions to dismiss. See Plaintiffs' Opposition to the Motions to Dismiss Plaintiffs' Securities Act Claims Submitted By: 1) Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Anne-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman; 2) The May/June 2007 Underwriter Defendants; 3) Friedman, Billings, Ramsey & Co., Inc.; 4) UBS Securities LLC and Bear Stearns & Co, Inc.; and 5) Stifel, Nicolaus & Company, Incorporated, filed December 22, 2008 (Docs. 152, 153); Plaintiffs' Opposition to Defendants' Motion to Dismiss Consolidated Amended Complaint Filed by Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Anne-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman, filed December 22, 2008 (Docs. 154, 155, 156, 157). On February 5, 2009, the Defendants filed reply briefs in further support of their motions. See Reply in Support of Opposed Motion by May/June 2007 Underwriter Defendants to Dismiss Consolidated Class Action Complaint, filed February 5, 2009 (Doc. 165); Joinder of Underwriter Defendant Stifel, Nicolaus & Company, Incorporated in Reply in Support of Motion to Dismiss, filed February 5, 2009 (Doc. 166); Reply Memorandum (and Joinder) in Support of Motion to Dismiss by Underwriter Defendants UBS Securities LLC and Bear, Stearns & Co., Inc., filed February 5, 2009 (Doc. 167); Reply Memorandum in Support of Motion to Dismiss Consolidated Amended Complaint by Defendants Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Anne-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman, filed February 5, 2009 (Doc. 168); Reply in Support of Motion of Friedman, Billings, Ramsey & Co., Inc. to Dismiss, filed February 5, 2009 (Doc. 170).

On April 22, 2009, the Court heard oral argument from the Plaintiffs and the Defendants in connection with the Defendants' motions to dismiss the CCAC. During oral argument on April 22, 2009, counsel for Friedman Billings Ramsey, one of the Underwriter Defendants, conceded that Regulation S-K's disclosure obligations bind the Defendants: "There are two requirements in judging our securities filings. One, we have to say certain things. Reg S-K and S-C provide what we have to say. And then otherwise, we cannot misrepresent what we do say. We cannot say something that's false or would mis-lead." Transcript of Hearing at 38:12-18 (taken April 22, 2009)(Gutman). The Plaintiffs' counsel concurred in the interpretation of the Defendants' disclosure obligations. See id. at 196:24-197:10 (Court, Zivitz).

On January 27, 2010, the Court issued two Memorandum Opinions and Orders, granting in part and denying in part the Defendants' motions to dismiss the CCAC. See Memorandum Opinion and Order, 683 F.Supp.2d 1236, 1261 (D.N.M.2010) (Doc. 251)("MOO"); Amended Memorandum Opinion and Order, 695 F.Supp.2d 1165 1225- (D.N.M.2010) (Doc. 252) ("Amended MOO"). The Court dismissed the Plaintiffs' claims arising under Sections 11, 12(a)(2), and 15 of the Securities Act against all of the Defendants. The Court dismissed the claims based on Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, against Thornburg, Badal, Decoff and Simmons. The Court dismissed the Section 20(a) claims against Thornburg and Badal. The Court allowed the Section 10(b) claims to proceed against Goldstone, and, because TMI is in bankruptcy and subject to the automatic stay of 11 U.S.C. § 362, the Court reserved ruling on Section 10(b) claims against TMI and on the Section 20(a) claims against Goldstone, Simmons, and Decoff.

In dismissing the Plaintiffs' claims arising under Sections 11 and 12(a)(2) of the Securities Act, the Court noted that liability attaches in two instances: (i) where a defendant omits to disclose information that the law requires the defendant to disclose; or (ii) where a defendant issues a materially false or misleading statement in a registration statement or prospectus. See MOO at 1249-51. The Court further held that liability cannot be premised on silence in the absence of a duty to disclose and held that the Plaintiffs "failed to provide the Court with the source of such a duty." Amended MOO at 1223 (citation omitted). See MOO at 1258-59.

In dismissing the Plaintiffs' claims arising under Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, the Court noted that the sources of a duty to disclose information under the federal securities laws are found either: (i) in express mandates of the statute and rules promulgated under the statute; or (ii) in the general anti-fraud provisions of the statutes and rules. See Amended MOO at 1209. The Court further stated that the Plaintiffs failed to provide such a source for the Defendants' disclosure duties:

Amended MOO at 1209.

In analyzing the Plaintiffs' Section 20(a) claims against Thornburg and Badal, the Court noted that "the only articulable act or omission by TMI as an entity, the misleading Form 8-K dated March 3, 2008, was filed after Thornburg's tenure as CEO ended" and after Badal had retired from TMI. Amended MOO at 1217-18. As a result, the Court dismissed the Plaintiffs' Section 20(a) claims against these two individuals.

The remedy the Defendants sought in moving to dismiss was a dismissal with prejudice. In opposing the Defendants' motions to dismiss, however, the Lead Plaintiffs requested leave to amend in the event that the Court found the CCAC to be deficient in any way. See Plaintiffs' Opposition to Defendants' Motion to Dismiss Consolidated Amended Complaint at 58 n. 48; Plaintiffs' Opposition to the Motions to Dismiss Plaintiffs' Securities Act Claims at 32. The Memorandum Opinions and Orders did not state, however, whether the dismissals were with or without prejudice. On February 5, 2010, the Plaintiffs filed a Motion for Clarification of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint, see Doc. 254 ("Motion for Clarification"), ostensibly asking the Court to clarify this apparent ambiguity. Specifically, the Plaintiffs requested that the Court: (i) order that the Court issued the Memorandum Opinions and Orders without prejudice; and (ii) allow the Plaintiffs to amend the CCAC to cure the averments it held to be deficient. In their motion, the Lead Plaintiffs asserted that, if permitted, they would amend the CCAC to address the following: (i) the Court's holding that the Plaintiffs failed to state a claim under Sections 11 and 12(a) of the Securities Act, to discuss, among other things, the impact of Regulation S-K, 17 C.F.R. § 229.303, and Regulation S-X, 17 C.F.R. § 210.4-01, on the Defendants' liability for material omissions from the offering documents; (ii) the Court's implicit finding that TMI was not liable for Goldstone's misrepresentations in June 2007 and July 2007, insofar as that finding affects the Individual Defendants' liability under Section 20(a); (iii) the Individual Defendants' liability under Section 20(a) of the Exchange Act as a result of TMI's failure to comply with its affirmative duty pursuant to Section 10(b) of the Exchange Act to disclose all material, nonpublic information in its possession before selling $900 million in TMI securities during the Class Period; and (iv) the Court's holding that the alleged misstatements in TMI's offering documents are not actionable.20 See Motion for Clarification ¶ 9, at 4. The Lead Plaintiffs devoted substantial time and space, however, to arguing the legal merits of their case, and insisted that, if permitted, they would add additional factual and legal assertions to the CCAC from which the Court would conclude that they had stated a proper claim. See Motion for Clarification ¶¶ 9-29, at 4-12. Specifically, the Lead Plaintiffs represented that they intended to add additional factual and legal allegations to state a claim under Sections 11 and 12(a) of the Securities Act, additional allegations to show that TMI was obligated to disclose all material non-public information in its possession, and additional allegations that would allow it to state a claim under Section 20(a) of the Exchange Act against Thornburg and Badal.

The Defendants opposed the Plaintiffs' Motion for Clarification on February 18, 2010. See Certain D & O Defendants' Response in Opposition to Plaintiffs' Motion for Clarification of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint, filed February 18, 2010 (Doc. 257); Defendants Joseph H. Badal, Paul Decoff, Michael Jeffers, Owen Lopez and Stuart Sherman's Joinder to Certain D & O Defendants' Response in Opposition to Plaintiffs' Motion for Clarification [Docket No. 257] of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint, filed February 18, 2010 (Doc. 259); Joinder of Defendants Goldstone and Simmons in Certain D & O Defendants' Memorandum of Law in Opposition to Plaintiffs' Motion for Clarification, filed February 22, 2010 (Doc. 261); Underwriter Defendants' Opposition to Lead Plaintiffs' Motion for Clarification of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint, filed February 18, 2010 (Doc. 258). The only Defendant who did not appear to oppose the Lead Plaintiffs' motion was TMI, against whom this action is stayed under 11 U.S.C. § 362. The Plaintiffs made clear that their Motion for Clarification sought no relief as to TMI. On March 4, 2010, the Plaintiffs filed their reply papers. See Plaintiffs' Reply Memorandum of Law in Further Support of Their Motion for Clarification of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint and in Response to the Underwriter Defendants' Opposition Thereto, filed March 4, 2010 (Doc. 271); Plaintiffs' Reply Memorandum of Law in Further Support of Their Motion for Clarification of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint and in Response to Certain D & O Defendants' Opposition Thereto, filed March 4, 2010 (Doc. 272).

On June 9, 2010, the Court heard oral argument in connection with the Plaintiffs' motion for clarification. At the hearing, the Court opened up conversation by giving the parties its initial impression of the motion. The Court stated that, because the issue whether the Lead Plaintiffs could amend was not addressed in the opinion, and the parties seek different outcomes on that point-the Defendants sought dismissal with prejudice, the Lead Plaintiffs sought leave to amend if the CCAC was found deficient—the Motion Seeking Clarification was appropriate. See Transcript of Hearing at 8:17-24 (taken June 9, 2010)("June 9, 2010 Tr.")(Court). The Court stated that it would thus grant the motion to clarify. See June 9, 2010 Tr. at 8:17-24 (Court); id. at 30:11-14 (Court).

In granting the Plaintiffs' motion, the Court clarified that, because the lawsuit is still, in many respects, in its infancy, it would be inclined to allow the Lead Plaintiffs to file a motion to amend and/or a motion for reconsideration. See June 9, 2010 Tr. at 8:25-12:10 (Court). The Court stated that, at this early stage, it would be inclined to allow the Lead Plaintiffs to amend and that it believed there might exist factual allegations that the Lead Plaintiffs could add to cure their pleading deficiencies. See June 9, 2010 Tr. at 9:7-10:4 (Court). The Court also said that the Lead Plaintiffs would have to file a motion to amend, not file an amended complaint, so that the Court and the Defendants could decide whether the amendment would be futile. See June 9, 2010 Tr. at 8:25-9:6 (Court).

The Court then said it thought that most of the Lead Plaintiffs' motion to clarify was not, in fact, a motion to clarify or a motion to amend, but was a motion to reconsider. See June 9, 2010 Tr. at 9:7-12:10 (Court). It appeared to the Court that the Lead Plaintiffs disagreed with the Court on some of its rulings. See June 9, 2010 Tr. at 9:7-15 (Court). The Court thought that the Lead Plaintiffs needed to file a motion to reconsider on those issues, rather than trying to get such review on a motion to amend, so the Court and the Defendants could see clearly where the Lead Plaintiffs disagree with the Court's legal conclusions on full briefing. See June 9, 2010 Tr. at 9:7-12:10 (Court). The Court was concerned that it did not yet have the benefit of a full briefing from the Defendants on the issues on which the Lead Plaintiffs want reconsideration. See June 9, 2010 Tr. at 12:7-10 (Court).

The Court then allowed the parties to argue, being informed of the Court's inclinations. Benjamin Sweet, attorney for the Lead Plaintiffs, gave some examples of additional factual allegations that the Lead Plaintiffs would add if given the opportunity to amend the CCAC. See June 9, 2010 Tr. at 15:6-16:7 (Sweet). Betsy Manifold, also an attorney for the Lead Plaintiffs, suggested allegations that the Lead Plaintiffs would add to further support their control-person claims and the scienter element of their Section 10(b) claims against certain Individual Defendants. See June 9, 2010 Tr. at 18:9-25 (Manifold). Ms. Manifold admitted, however, that what they sought was a hybrid motion for leave to amend and motion to reconsider. See June 9, 2010 Tr. at 19:4-11 (Manifold). Mr. Sweet conceded that he would be satisfied if the Court allowed the Lead Plaintiffs to file motions to amend and for reconsideration, rather than grant the relief sought in those motions on the motion for clarification. See June 9, 2010 Tr. at 29:12-15 (Court, Sweet).

Steven Farina, Defendant Friedman, Billings, Ramsey & Co., Inc.'s attorney, argued that any motion to amend or for reconsideration would be futile, because the proposed amendments do not cure the deficiencies that the Court has found in the CCAC and because there exist no grounds for reconsideration. See June 9, 2010 Tr. at 20:13-23:21 (Court, Farina). Mr. Farina expressed concerns that the Lead Plaintiffs were blurring the standards used to review those two motions, and conceded that requiring the Lead Plaintiffs to file a written motion would help with that potential problem. See June 9, 2010 Tr. at 23:14-24:20 (Court, Farina). David Bohan, the attorney for UBS Securities and Bear, Stearns, argued that the Court should deny the motion to amend, because the Lead Plaintiffs should have brought the motion to amend when the new facts came to their attention, rather than waiting until after the motions to dismiss were granted in part and then challenging whether those dismissals were with or without prejudice. See June 9, 2010 Tr. at 25:4-27:17 (Court, Bohan). Jonathan Dickey, counsel for certain Underwriter Defendants, expressed his confidence that the Lead Plaintiffs' motion to amend and motion to reconsider would fail. See June 9, 2010 Tr. at 28:8-13 (Dickey). He also reminded the Court that his clients are currently dismissed from the action and stressed that the amendment/reconsideration process should move swiftly, and not become a series of rolling amendments as the Plaintiffs try to mend the CCAC and repair their claims against dismissed Defendants. See June 9, 2010 Tr. at 27:20-28:25 (Dickey). At the June 9, 2010 hearing, the Court instructed the Plaintiffs to file their motion within thirty days, orally setting forth detailed instructions on how the Plaintiffs should structure their motion. Thereafter, on July 5, 2010, the Court issued a Memorandum Opinion and Order granting the Plaintiffs' motion for clarification, and setting forth in writing the instructions the Court had set forth orally. See Doc. 300 (July 5, 2010 MOO). In its July 5, 2010 MOO, the Court stated:

July 5, 2010 MOO at 18-20, 2010 WL 2998471.

The Plaintiffs now request that the Court: (i) grant them leave to amend the CCAC; and (ii) reconsider certain portions of its January 27, 2010 orders granting in part and denying in part the Defendants' motions to dismiss the CCAC. The Plaintiffs also filed a supporting memorandum. See Plaintiffs' Memorandum of Law in Support of Omnibus Motion for (i) Leave to Amend the Consolidated Class Action Complaint (ii) For Reconsideration of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint, filed January 9, 2010 (Doc. 309)("Memorandum"). The Defendants oppose the Motion. See Opposition of Defendants Goldstone and Simmons to Plaintiffs' Motion for Leave to Amend and for Reconsideration, filed August 23, 2010 (Doc. 319)("Goldstone and Simmons Response"); Defendants Badal, Decoff, Lopez, and Sherman's Opposition to Plaintiffs' Omnibus Motion for Leave to Amend and for Reconsideration, filed August 23, 2010 (Doc. 320)("Badal, Decoff, Lopez, and Sherman's Response"); Garrett Thornburg and Certain Director Defendants' Response in Opposition to Lead Plaintiffs' Omnibus Motion for (i) Leave to Amend the Consolidated Class Action Complaint and (ii) for Reconsideration of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint, filed August 23, 2010 (Doc. 327); May/ June 2007 Underwriter Defendants' Opposition to Plaintiffs' Motion for Leave to Amend and for Reconsideration, filed August 23, 2010 (Doc. 321); Opposition of FBR Capital Markets & Co. To Plaintiffs' Motion for Leave to Amend and Reconsideration, August 23, 2010 (Doc. 328); Joinder and Supplementary Memorandum of Underwriter Defendants UBS and Bear Stearns in Opposition to Plaintiffs' Omnibus Motion for Leave to Amend and for Reconsideration, filed August 23, 2010 (Doc. 325); May/June 2007 Underwriter Defendants' Request for Judicial Notice in Opposition to Plaintiffs' Motion for Leave to Amend and for Reconsideration, filed August 23, 2010 (Doc. 322). The September 2007 and January 2008 Underwriter Defendants renew their request that, if the Court reconsiders its decision that TMI's 2007 Form 10-K was not actionable, the Court dismiss the UBS and Bear Stearns, because the Plaintiffs have not cured their lack of statutory standing for their claims based on the January 2008 offering. On October 22, 2010, the Plaintiffs filed their Omnibus Reply in Further Support of Plaintiffs' Omnibus Motion For: (i) Leave to Amend the Consolidated Class Action Complaint, and (ii) for Reconsideration of the Court's January 27, 2010 Memorandum Opinions and Orders Granting in Part and Denying in Part Defendants' Motions to Dismiss the Consolidated Amended Complaint. See Doc. 341 ("Reply").

At the November 3, 2010 hearing, the parties agreed that the Court should first decide whether to reconsider its MOO and then decide whether to grant allow the Plaintiffs leave to file an amended complaint. The Plaintiffs conceded that "there is no Tenth Circuit opinion that's on point with regard to the disclosure or abstain rule," and whether it applies to Securities Act claims. See Transcript of Hearing at 12:6-8 (taken November 3, 2010)(Sweet). The Plaintiffs asserted that the Defendants should have disclosed (i) "the presence of the Alt-A assets in the purchased ARM portfolio"; (ii) "the collateralization of the Alt-A and the RPA agreements"; and (iii) "the cross-default provisions. Tr. at 31:11-32:10 (Sweet)."

On February 23, 2011, the Plaintiffs filed their Notice of Supplemental Authority, calling the Court's attention to the United States Court of Appeals for the Second Circuit's recent opinion in Litwin v. Blackstone Group, L.P., 634 F.3d 706 (2d Cir. 2011), which reversed a district court's dismissal of a Securities Act class action complaint, holding that "a violation of Item 303 of Regulation S-K, 17 C.F.R. § 229.303, gives rise to liability under Sections 11, 12(a)(2) and 15 of the Securities Act." Notice of Supplemental Authority at 1, filed February 23, 2011 (Doc. 353). On March 3, 2011, the Underwriter Defendants responded, asserting that they "have never contended otherwise; rather, the Underwriters' position from the beginning of this litigation has been that Plaintiffs fail to allege a violation of Item 303 of Regulation S-K." Response of the Underwriter Defendants to Plaintiffs' Notice of Supplemental Authority at 1, filed March 3, 2011 (Doc. 354). Also on March 3, 2011, Goldstone and Simmons responded, stating that the Plaintiffs "assert the unremarkable proposition that Litwin holds that a violation of Item 303 of Regulation S-K may give rise to liability under Sections 11, 12(a)(2) and (15) of the Securities Act." Response of Defendants Goldstone and Simmons to Plaintiffs' Notice of Supplemental Authority at 1, filed March 3, 2011 (Doc. 355).

LAW REGARDING AMENDMENT OF PLEADINGS

Under rule 15(a) of the Federal Rules of Civil Procedure, the court should freely grant leave to amend a pleading where justice so requires. See In re Thornburg Mortg., Inc. Sec. Litig., 265 F.R.D. 571, 579-80 (D.N.M.2010) (Browning, J.); Youell v. FNU Russell, No. CIV 04-1396 JB/WDS, 2007 WL 709041, at **1-2 (D.N.M. Feb. 14, 2007) (Browning, J.); Burleson v. ENMR-Plateau Tele. Coop., No. CIV 05-0073 JB/KBM, 2005 WL 3664299, at **1-2 (D.N.M. Sept. 23, 2005) (Browning, J.). The Supreme Court of the United States has stated that, in the absence of an apparent reason such as "undue delay, bad faith or dilatory motive . . . repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.," leave to amend should be freely given. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Furthermore, the United States Court of Appeals for the Tenth Circuit has held that district courts should grant a plaintiff leave to amend when doing so would yield a meritorious claim. See Curley v. Perry, 246 F.3d 1278, 1284 (10th Cir.2001); In re Thornburg Mortg., Inc. Sec. Litig., 265 F.R.D. at 579-80.

A court should deny leave to amend under rule 15(a), however, where the proposed "amendment would be futile." Jefferson County Sch. Dist. v. Moody's Investor's Serv., 175 F.3d 848, 859 (10th Cir.1999). See In re Thornburg Mortg., Inc. Sec. Litig., 265 F.R.D. at 579-80. An amendment is "futile" if the pleading "as amended, would be subject to dismissal." In re Thornburg Mortg., Inc. Sec. Litig., 265 F.R.D. at 579-80 (citing TV Comm'ns Network, Inc. v. Turner Network Television, Inc., 964 F.2d 1022, 1028 (10th Cir.1992)). A court may also deny leave to amend "upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, [or] failure to cure deficiencies by amendments previously allowed." In re Thornburg Mortg., Inc. Sec. Litig., 265 F.R.D. at 579 (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365-66 (10th Cir.1993)).

LAW REGARDING MOTION FOR RECONSIDERATION

Under Tenth Circuit case law,

Price v. Philpot, 420 F.3d 1158, 1167 n. 9 (10th Cir.2005). In addition, "every order short of a final decree is subject to reopening at the discretion of the district judge." Price v. Philpot, 420 F.3d at 1167 n. 9 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 12, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)) (internal quotation marks omitted). A district court has discretion to revise interlocutory orders before the entry of a final judgment. See Trujillo v. Bd. of Educ. of the Albuquerque Pub. Schs., 212 Fed.Appx. 760, 765 (10th Cir.2007). When a plaintiff seeks to obtain reconsideration of a non-final order, his or her motion for reconsideration is considered "an interlocutory motion invoking the district court's general discretionary authority to review and revise interlocutory rulings prior to entry of final judgment." Wagoner v. Wagoner, 938 F.2d 1120, 1122 n. 1 (10th Cir.1991). A motion for reconsideration is an "inappropriate vehicle[ ] to reargue an issue previously addressed by the court when the motion merely advances new arguments, or supporting facts which were available at the time of the original motion." Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir.2000). "Grounds warranting a motion to reconsider include (1) an intervening change in the controlling law, (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent manifest injustice." Servants of Paraclete v. Does, 204 F.3d at 1012. "Thus, a motion for reconsideration is appropriate where the court has misapprehended the facts, a party's position, or the controlling law." Servants of Paraclete v. Does, 204 F.3d at 1012 (citation omitted). A district court has considerable discretion in ruling on a motion to reconsider. See Phelps v. Hamilton, 122 F.3d 1309, 1324 (10th Cir.1997).

Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 727-28, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975). The Securities Act deals with the initial issuance of securities, and with the required contents of registration statements and prospectuses. See 421 U.S. at 728, 95 S.Ct. 1917. The Exchange Act, on the other hand, is primarily known for prohibiting fraud in connection with the purchase or sale of securities. See 421 U.S. at 728-29, 95 S.Ct. 1917. The Plaintiffs accused the Defendants of violating both statutes.

1. Relevant Law Regarding Rule 10b-5 Claims.

"In order to state a claim under 10(b) of the Exchange Act and Rule 10b-5, Plaintiffs must allege: (1) a misleading statement or omission of a material fact; (2) made in connection with the purchase or sale of securities; (3) with intent to defraud or recklessness; (4) reliance; and (5) damages." In re Sun Healthcare Group, Inc. Sec. Litig., 181 F.Supp.2d 1283, 1286-87 (D.N.M.2002). Furthermore, "[w]hen evaluating a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the district court must evaluate `the totality of the pleadings' to determine if the plaintiffs have stated an actionable claim of securities fraud." Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1092 (10th Cir.2003).

The Supreme Court "has long recognized that meritorious private actions to enforce federal antifraud securities laws are an essential supplement to criminal prosecutions and civil enforcement actions brought, respectively, by the Department of Justice and the Securities and Exchange Commission (SEC)." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 313, 127 S.Ct. 2499. On the other hand, "[p]rivate securities fraud actions, ... if not adequately contained, can be employed abusively to impose substantial costs on companies and individuals whose conduct conforms to the law." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 313, 127 S.Ct. 2499. Thus, because a 10b-5 claim is in essence a fraud claim, it is subject to stringent pleading requirements. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1095 (explaining that rule 9(b) alone governed before the PSLRA, but that the PSLRA "strengthened what is required adequately to plead two of [the] elements [of a Rule 10b5 claim]."); Seattle-First Nat. Bank v. Carlstedt, 800 F.2d 1008, 1010 (10th Cir.1986) ("Given the specific reliance on Rule 9(b) in our decision in Utah State University v. Bear, Stearns & Co., [549 F.2d 164, 171 (10th Cir. 1977)], we hold that in this circuit the particularity requirement of Rule 9(b) is applicable generally in securities fraud cases."). Those requirements extend to the allegations relevant to each defendant's required mental state.

15 U.S.C. § 78u-4(b)(2) (emphasis added). See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1095.

a. Pleading Scienter.

Under PSLRA, a plaintiff must, for each act or omission alleged to violate the Exchange Act, state with particularity facts giving rise to a strong inference that each defendant alleged to be responsible for that act or omission acted with an intent to deceive, manipulate, or defraud-in other words, acted with a mental state known as scienter. See 15 U.S.C. § 78u-4(b)(2); City of Phila. v. Fleming Co., Inc., 264 F.3d 1245, 1259 (10th Cir.2001). To allege scienter in connection with non-disclosure of material facts, a plaintiff must plead facts demonstrating that (i) the defendant knew of the potentially material fact; and (ii) the defendant knew that failure to reveal the potentially material fact would likely mislead investors. See City of Phila. v. Fleming Co., Inc., 264 F.3d at 1261.

Under certain circumstances, recklessness can satisfy the mental-state requirement, although "courts have been cautious about imposing liability for securities fraud based on reckless conduct." Id. at 1260. "The requirement of knowledge in this context may be satisfied under a recklessness standard by the defendant's knowledge of a fact that was so obviously material that the defendant must have been aware both of its materiality and that its non-disclosure would likely mislead investors." Id. at 1261. The Tenth Circuit has also described recklessness in a Section 10(b) context as "conduct that is an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it." Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1232 (10th Cir. 1996).

To create the "strong" inference of scienter that the PSLRA requires, a plaintiff must allege specific facts giving rise to an inference of culpability that is at least as strong as any competing inference of good faith. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 328-29, 127 S.Ct. 2499.

Id. As the Supreme Court expressed:

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 314, 127 S.Ct. 2499. The scienter analysis is holistic, requiring the court to analyze all allegations in the complaint and not view any particular allegation in isolation. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 322-23, 127 S.Ct. 2499; Adams v. Kinder-Morgan, Inc., 340 F.3d at 1105. In addition to the complaint's allegations, a court must consider any documents incorporated by reference into the complaint, as well as matters of which a court may take judicial notice. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 322-23, 127 S.Ct. 2499.

Directors and officers, like all people, tend to act in their own economic self interest. See In re Sun Healthcare Group, Inc. Sec. Litig., 181 F.Supp.2d at 1297. Alleging such motives, therefore, does not significantly advance the ball in proving a strong inference of scienter, though a court should not completely ignore such allegations. See City of Phila. v. Fleming Co., Inc., 264 F.3d at 1262, 1269-70 (discussing the unhelpful nature of "generalized motives shared by all companies and which are not specifically and uniquely related to" a defendant). Once scienter is successfully alleged against an officer or executive of a corporation, however, that liability may be attributed to the corporation itself, if that officer is a senior controlling officer and was acting within the scope of his or her apparent authority. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1106-07.

b. Pleading False or Misleading Statements or Omissions.

"[T]he PSLRA increased the burden on a plaintiff's pleading of ... the allegation that the defendant made a false or misleading statement, or failed to state a material fact necessary to make statements made not misleading." Adams v. Kinder-Morgan, Inc., 340 F.3d at 1095. The PSLRA requires:

15 U.S.C. § 78u-4(b)(1). "A statement or omission is only material if a reasonable investor would consider it important in determining whether to buy or sell stock," but "[w]hether information is material also depends on other information already available to the market; unless the statement significantly altered the total mix of information available, it will not be considered material." Grossman v. Novell, Inc., 120 F.3d 1112, 1119 (10th Cir.1997) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976), and Basic, Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988)) (internal quotation marks omitted). In other words, materiality depends, not only on the importance of the misstated or omitted facts, but also upon the facts about which investing public is already aware. No matter how material a piece of information may be, however, "[s]ilence, absent a duty to disclose, is not misleading under Rule 10b-5." Basic v. Levinson, 485 U.S. at 239 n. 17, 108 S.Ct. 978.

2. Claims under Section 20(a) of the Exchange Act.

Section 20(a) of the Exchange Act provides for control person liability:

15 U.S.C. § 78t(a). To establish a defendant's liability as a controlling person, a plaintiff must prove two things: (i) a primary violation of the securities laws, and (ii) that the defendant had "control" over the primary violator. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1107. "The second element of the prima facie case [under Section 20(a)] requires that the plaintiffs plead facts from which it can be reasonably be inferred that the individual defendants were control persons." Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (citing Maher v. Durango Metals, Inc., 144 F.3d 1302, 1306 (10th Cir.1998)).

"The Tenth Circuit observed that § 20(a) `has been interpreted as requiring only some indirect means of discipline or influence short of actual direction to hold a controlling person liable.'" Lane v. Page, 649 F.Supp.2d 1256, 1306 (D.N.M.2009) (Browning, J.) (quoting Richardson v. MacArthur, 451 F.2d 35, 41 (10th Cir. 1971)). This showing requires the plaintiff to specify facts that "indicate that the defendants had `possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.'" Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (quoting Maher v. Durango Metals, Inc., 144 F.3d at 1306). See 17 C.F.R. § 230.405 ("The term control (including the terms controlling, controlled by and under common control with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.").

In Adams v. Kinder-Morgan, Inc., the Tenth Circuit addressed whether certain individuals involved in Kinder-Morgan, Inc. qualified as control persons for the purposes of Section 20(a) liability. First, the Tenth Circuit held that the directors were not, ipso facto, control persons.

Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (citing Dennis v. Gen. Imaging, Inc., 918 F.2d 496, 509-10 (5th Cir.1990); Burgess v. Premier Corp., 727 F.2d 826, 832 (9th Cir.1984); Cameron v. Outdoor Resorts of Am., Inc., 608 F.2d 187, 195 (5th Cir.1979)). On the other hand, the Tenth Circuit held that being a significant executive within the corporation, with ultimate management authority over a primary violator, is a control person:

Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (quoting Maher v. Durango Metals, Inc., 144 F.3d at 1305; citing In re Ribozyme Pharms., Inc. Sec. Litig., 119 F.Supp.2d 1156, 1167 (D.Colo.2000)). A high-ranking position within the corporation, however, standing alone, is unlikely to satisfy the "control" element of a control-person claim, unless the circumstance of the defendant's position and the nature of the underlying violation would lead to an inference that the person had control. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1109 (holding that the CFO of Kinder-Morgan, purely based on his position as CFO, was a control person where the securities-fraud violations related specifically to official reports on the company's financial performance). Importantly, it is not necessary that the control person actively participate in the alleged fraudulent activity. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108.21

3. The Abstain-or-Disclose Rule.

Section 10(b) of the Exchange Act "prohibits the use `in connection with the purchase or sale of any security ... [of] any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe.'" Chiarella v. United States, 445 U.S. 222, 225, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980) (quoting 15 U.S.C. § 78j, i.e., Section 10(b)). Rule 10b-5, promulgated pursuant to Section 10(b), makes it unlawful:

17 C.F.R. § 240.10b-5. According to the Supreme Court, at least in the context of insider-trading claims under Section 10(b), this rule requires insiders to disclose all material, nonpublic information in its possession before buying or selling securities. See Chiarella v. United States, 445 U.S. at 227-30, 100 S.Ct. 1108; United States v. Nacchio, 519 F.3d 1140, 1157 (10th Cir. 2008) ("It is black-letter law that insiders must disclose their material information or else abstain [from trading].") (citing Chiarella v. United States, 445 U.S. at 226-29, 100 S.Ct. 1108), vacated in part on other grounds, 555 F.3d 1234 (10th Cir.2009) (en banc). In Garcia v. Cordova, 930 F.2d 826 (10th Cir.1991), addressing claims of shareholders who sold their stock to a corporate insider, the Tenth Circuit stated:

930 F.2d at 828-29. See Johnson v. Aljian, 394 F.Supp.2d 1184, 1196 (C.D.Cal. 2004) ("In construing Rule 10b-5, the Supreme Court had held that when a corporate insider trades on the basis of material, nonpublic information, he or she employs a `deceptive device' as that term is used in Rule 10b-5.") (citing United States v. O'Hagan, 521 U.S. 642, 651-52, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997)).

To properly plead an insider-trading claim, a plaintiff must allege that an insider: (i) intentionally22 (ii) failed to disclose (iii) material nonpublic information (iv) in connection with the purchase and sale of securities, and (v) thereby made a profit. See Dirks v. SEC, 463 U.S. 646, 653-54, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983) ("[A]n insider will be liable under Rule 10b-5 for inside trading only where he fails to disclose material nonpublic information before trading on it and thus makes `secret profits.'"); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 & n. 7, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976) (holding that scienter, i.e., "intent to deceive, manipulate, or defraud," is an element of a private cause of action for damages under § 10(b) and Rule 10b-5); Blue Chip Stamps v. Manor Drug Stores, 421 U.S. at 735-36, 95 S.Ct. 1917 (recognizing a private cause of action under § 10(b) and Rule 10b-5); SEC v. Tex. Gulf Sulphur Co., 401 F.2d 833, 848 (2d Cir.1968) (en banc), cert. denied, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1969); Johnson v. Aljian, 394 F.Supp.2d at 1196 ("The Ninth Circuit has articulated the elements for an insider trading claim as the 1) intentional 2) misrepresentation or failure to disclose 3) a material fact 4) in connection with the purchase or sale of securities."). An insider must thus abstain from trading in the shares of the corporation unless the insider has first disclosed all material nonpublic information in the insider's possession. See Chiarella v. United States, 445 U.S. at 227, 100 S.Ct. 1108. The doctrine is known as the "abstain or disclose rule." Chiarella v. United States, 445 U.S. at 227, 100 S.Ct. 1108. The abstain-or-disclose rule applies both to individual insiders and to corporate issuers that engage in a public offerings of securities. See Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1204 (1st Cir.1996) (stating that, if corporate issuers of stock were not subject to liability under the insiders-trading law, "a corporate issuer selling its own securities would be left free to exploit its informational trading advantage, at the expense of investors, by delaying disclosure of material nonpublic negative news until after completion of the offering."), superceded by statute on other grounds, 15 U.S.C. § 78u-4(b)(1)-(2); McCormick v. Fund. Am. Cos., 26 F.3d 869, 876 (9th Cir.1994) ("Numerous authorities have held or otherwise stated that the corporate issuer in possession of material nonpublic information, must, like other insiders in the same situation, disclose that information to its shareholders or refrain from trading with them.") (citations omitted); Kohler v. Kohler Co., 319 F.2d 634, 638 (7th Cir.1963) ("[U]nderlying principles [regarding disclosure of material nonpublic information] apply not only to majority stockholders of corporations and corporate insiders, but equally to corporations themselves,"); Green v. Hamilton Int'l Corp., 437 F.Supp. 723, 728 (S.D.N.Y.1977) ("[T]here can be no doubt that the prohibition against `insiders' trading extends to a corporation.").

4. Securities Act of 1933.

Congress put the Securities Act of 1933 in place to provide greater protection to purchasers of registered securities. See Herman & MacLean v. Huddleston, 459 U.S. 375, 383, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983). Claims under the Securities Act are much more limited in scope than are those under the Exchange Act. The Securities Act in not concerned with the "aftermarket." With a Securities Act claim, the only pertinent representations are those made within the four corners of the issuers' offering documents or in documents expressly incorporated therein. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. at 752, 95 S.Ct. 1917. Furthermore, the PSLRA does not appear to affect the pleading standards under the Securities Act, because the heightened pleading requirements of the PSLRA apply only in "private action[s] arising under this chapter," 15 U.S.C. § 78u-4(b)(1), and "this chapter" refers to Chapter 2B of Title 15. The Securities Act of 1933, however, is Chapter 2A, see 15 U.S.C. § 77a ("This subchapter[, subchapter I of Chapter 2A,] may be cited as the `Securities Act of 1933'."); 15 U.S.C. § 78a ("This chapter[, chapter 2B,] may be cited as the `Securities Exchange Act of 1934'.").

Under certain circumstances, rule 9(b)'s heightened-pleading requirements might apply to the allegations of material misstatements under a 1933 Act claim. See Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1251-52 (10th Cir.1997). When a plaintiff's 1933 Act is based on negligent or innocent conduct, rather than fraudulent conduct, however, a court applies the more lenient pleading standards of rule 8(a). See Schwartz v. Celestial Seasonings, Inc., 124 F.3d at 1251-52.

a. Section 11 of the Securities Act.

Section 11 of the Securities Act imposes liability upon every person who, among other things, (i) signed the registration statement, (ii) was a director of the issuer, (iii) was an underwriter of the offering, or (iv) prepared or certified any report or valuation used in connection with the registration statement, for any materially misleading statements and omissions made therein. See 15 U.S.C. § 77k. "The pleading requirements of a § 11 claim are less stringent than that of a § 10(b) claim," and it "imposes strict liability against the issuer of securities where a registration statement contains material misstatements or omits material facts." Schaffer v. Evolving Sys., Inc., 29 F.Supp.2d 1213, 1220 (D.Colo.1998). Even innocent misrepresentations will subject the issuer of securities to liability. See Herman & MacLean v. Huddleston, 459 U.S. at 381, 103 S.Ct. 683 ("If a plaintiff purchased a security issued pursuant to a registration statement, he need only show a material misstatement or omission to establish his prima facie case. Liability against the issuer of a security is virtually absolute, even for innocent misstatements.").

A claim under Section 11 must be based on a registration statement filed with the SEC. See Herman & MacLean v. Huddleston, 459 U.S. at 381, 103 S.Ct. 683; Schaffer v. Evolving Sys., Inc., 29 F.Supp.2d at 1220. A Section 11 plaintiff must identify a material misrepresentation within the four corners of the challenged registration statement, or an omission of a material fact required to be stated therein or necessary to make the statements therein not misleading. See Herman & MacLean v. Huddleston, 459 U.S. at 381-82, 103 S.Ct. 683 (contrasting § 11 with § 10(b) of the Exchange Act); Grimm v. Whitney-Fidalgo Seafoods, Inc., No. 73 Civ. 1304, 1973 WL 495, at *2 (S.D.N.Y. Dec. 4, 1973). Corporate insiders potentially face Section 11 liability for material false statements in registration statements only if they were directors at the time of the offering or if they personally signed the registration statement at issue. See In re Williams Sec. Litig., 339 F.Supp.2d 1242, 1269 (N.D.Okla.2003).

b. Section 12(a)(2) of the Securities Act.

Section 12(a)(2) of the Securities Act provides:

15 U.S.C. § 77l(a). A claim under Section 12(a)(2) thus must be based on a prospectus delivered to persons or an entity purchasing securities in a offering, which generally incorporates the SEC registration statement. Even if a Section 12(a)(2) claim is based on an oral statement, the oral statement must relate to a prospectus. See Gustafson v. Alloyd Co., 513 U.S. 561, 567-68, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995). The Section 12(a)(2) claim must identify a material misrepresentation in or omission either from the prospectus or from an oral representation directly concerning the prospectus. See Gustafson v. Alloyd Co., 513 U.S. at 578, 115 S.Ct. 1061. Section 12(a)(2) liability is similar to Section 11 liability, in that "[t]he purchaser need not prove scienter, fraud, or negligence on the part of the seller, nor need he establish that he relied upon the misrepresentation or omission or that his or her loss was a direct or proximate result of the misrepresentation or omission." Schaffer v. Evolving Sys., Inc., 29 F.Supp.2d at 1220 (citing MidAmerica Fed. Sav. & Loan Ass'n v. Shearson/Am. Express Inc., 886 F.2d 1249, 1256-57 (10th Cir.1989)). Unlike a Section 11 claim, however, the only proper defendants in a Section 12(a)(2) action are those who "offer or sell" unregistered securities. Schaffer v. Evolving Sys., Inc., 29 F.Supp.2d at 1220 (citing Pinter v. Dahl, 486 U.S. 622, 641, 108 S.Ct. 2063, 100 L.Ed.2d 658 (1988)). The Tenth Circuit has recognized that liability extends also "to the person who successfully solicits the purchase, motivated at least in part by a desire to serve his own financial interests or those of the securities owner." Maher v. Durango Metals, Inc., 144 F.3d at 1307 (quoting Pinter v. Dahl, 486 U.S. at 647, 108 S.Ct. 2063).

c. Section 15 Control Person Liability.

Section 15 is a "control person" provision, similar to Section 20(a) of the Exchange Act. It states, in relevant part:

15 U.S.C. § 77o. "Although worded differently, the control person provision of § 15 and § 20(a) are interpreted the same." Maher v. Durango Metals, Inc., 144 F.3d at 1305 n. 7 (citing First Interstate Bank v. Pring, 969 F.2d 891, 897 (10th Cir.1992)).

5. Item 303 of Regulation S-K and Regulation S-X.

Item 303 of Regulation S-K, 17 C.F.R. § 229.303, and Regulation S-X, 17 C.F.R. § 210.4-01, require the disclosure of specific information in prospectuses and registration statements. Item 303 of Regulation S-K requires the disclosure of, among other things, "any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant's liquidity increasing or decreasing in any material way," and "any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations." 17 C.F.R. §§ 229.303(a)(1) & (a)(3)(ii). Some courts have held that a registrant's violation of Item 303 of Regulation S-K can give rise to liability under the federal securities laws. See Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1296 (9th Cir.1998) ("[A]llegations which sufficiently state a claim under Item 303 also state a claim under section 11 [of the Securities Act and a]llegations which would support a claim under Item 303(a)(3)(ii) are sufficient to support a claim under section 12(a)(2)."); In re Scholastic Corp. Sec. Litig., 252 F.3d 63, 70-73 (2d Cir.2001) (reversing dismissal of claims arising under Section 10(b) of the Exchange Act where the plaintiffs adequately pled violation of Item 303 of Regulation S-K); J & R Marketing, SEP v. Gen. Motors Corp., 549 F.3d 384, 392 (6th Cir.2008) (holding that registrants' disclosure obligations under Section 11 include duty under Item 303 to make forward-looking projections regarding information known to registrant); Garber v. Legg Mason, Inc., 537 F.Supp.2d 597, 611 (S.D.N.Y. 2008) ("An omission of fact `required to be stated' under Item 303 will generally produce liability under section 11.")(quoting In re Initial Pub. Offering Sec. Litig., 358 F.Supp.2d 189, 211 (S.D.N.Y.2004)); Milman v. Box Hill Sys. Corp., 72 F.Supp.2d 220, 231 (S.D.N.Y.1999) (denying motion to dismiss the plaintiffs' claims under Sections 11 and 12(a)(2) of Securities Act where the plaintiffs sufficiently pled violation of Item 303).

Similarly, Regulation S-X, 17 C.F.R. § 210.4-01 requires financial statements which are filed with the SEC to be in compliance with Generally Accepted Accounting Principles ("GAAP"). 17 C.F.R. § 210.4-01(a)(1)("Financial statements filed with the Commission which are not prepared in accordance with generally accepted accounting principles will be presumed misleading or inaccurate, despite footnotes or other disclosures, unless the Commission has otherwise provided."). One such GAAP provision, Financial Account Standards ("FAS") 107, at ¶ 15A, Disclosures About Fair Value of Financial Instruments, as amended by FAS 161, Disclosures About Derivative Instruments and Hedging Activities (2008), requires the disclosure of "significant concentrations of credit risk arising from all financial instruments, whether from an individual counterparty or groups of counterparties." (emphasis in original, footnote omitted).

ANALYSIS

The Plaintiffs ask the Court to reconsider portions of its January 27, 2010 orders and to grant them leave to file their SAC. The Defendants oppose the Motion. After carefully reviewing the parties' briefs and oral arguments at the hearing, the Court will reconsider portions of its orders. The Court will reconsider what disclosure obligations Item 303 and the abstain-or-disclose rule impose, and reserving ruling on the motion to dismiss the Section 20(a) claims against Goldstone, Simmons, and Decoff, dismissing the Plaintiffs' claims against Decoff, but not dismissing the Plaintiffs' claims against Goldstone and Simmons. The Court also grants the Plaintiffs leave to file their SAC, which cures pleading deficiencies for its Section 20(a) claims against Thornburg.

I. THE COURT WILL RECONSIDER ITS FAILURE TO ADDRESS THE DISCLOSURE DUTIES THAT THE ABSTAIN-OR-DISCLOSE RULE AND ITEM 303 IMPOSE, BUT WILL NOT CHANGE ITS DECISION TO DISMISS THE PLAINTIFFS' SECURITIES ACT CLAIMS AGAINST THE UNDERWRITER DEFENDANTS.

The Court will reconsider whether Regulation S-K and Item 303 impose a duty on the Defendants to disclose adverse liquidity trends afflicting TMI during the offerings period. The Court concludes that the abstain-or-disclose rule does not apply to Section 11 claims. Additionally, the Plaintiffs have not set forth allegations establishing a violation of the Defendants' disclosure duty under Item 303. Neither the abstain-or-disclose rule nor Item 303 therefore alter the Court's decision to dismiss the Plaintiffs' claims against the Underwriter Defendants.

A. THE COURT WILL RECONSIDER WHETHER THE ABSTAIN-OR-DISCLOSE RULE IMPOSES DISCLOSURE DUTIES ON THE DEFENDANTS.

The Plaintiffs contend that the "Defendants are ... subject to the broad affirmative disclosure obligations of the `abstain or disclose' rule" under Section 11 of the Securities Act. Memorandum at 11 ("The `abstain or disclose' rule applies with equal force to corporate issuers like TMI that engage in a public offering of securities."). See Reply at 52 n. 35 ("[T]he `disclose or abstain' rule applies equally to matters arising under section 10(b) of the Exchange Act and section 11 of the Securities Act." (citations omitted)). The authority which the Plaintiffs cite in support of their contention does not support their assertion. The Plaintiffs cite the United States Court of Appeals for the Ninth Circuit's opinion in McCormick v. Fund American Companies, Inc. for the proposition that the refrain or disclose standard from insider trading cases under § 10(b) applies to the Securities Act claims. In McCormick v. Fund American Companies, Inc., the Ninth Circuit addressed a situation where a company purchased shares from the former CEO of Fireman's Fund Insurance Company ("FFIC"), a wholly-owned subsidiary of defendant Fund American Companies ("FAC"). At the time FFIC purchased McCormick's securities, it was involved in negotiations for the sale of FFIC to a large foreign insurer.

26 F.3d at 872-73 (emphasis added). The Ninth Circuit affirmed the district court's grant of summary judgment in favor of FAC on all claims. The Ninth Circuit began by holding that disclosure duties under § 10b apply to corporate insider traders as well as individual inside traders:

26 F.3d at 875-76 (italicization added). The Plaintiffs' rely on the Ninth Circuit's statement that "[n]umerous authorities have held or otherwise stated that the corporate issuer in possession of material nonpublic information, must, like other insiders in the same situation, disclose that information to its shareholders or refrain from trading with them" in support of their assertion that TMI must abstain or disclose under Section 11 of the Securities Act. The Ninth Circuit, however, was discussing disclosure duties under § 10(b) in the insider trading context of a company repurchasing its stock, as were the cases upon which it relied, and not the disclosure duties of a company engaged in a public offering. See, e.g., Smith v. Duff & Phelps, Inc., 891 F.2d at 1572-75 (addressing a company's repurchase of a terminated employee's stock: "Smith stated causes of action pursuant to section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934...."); Jordan v. Duff & Phelps, Inc., 815 F.2d at 435-39 (holding in the § 10(b) and Rule 10b-5 context that "[c]lose corporations buying their own stock, like knowledgeable insiders of closely held firms buying from outsiders, have a fiduciary duty to disclose material facts"; "[I]nsiders in closely held firms may not buy stock from outsiders in person-to-person transactions without informing them of new events that substantially affect the value of the stock" (emphasis added)); Kohler v. Kohler Co., 319 F.2d at 638 (addressing a plaintiff's Rule 10b-5 action seeking "damages arising out of a sale of Kohler Co. common stock which he sold to the company": "It is clear that the statute [§ 10(b)] was intended to create a form of fiduciary relationship between so-called corporate `insiders' and `outsiders' with whom they deal in company securities which places upon the insider duties more exacting than mere abstention from what generally is thought to be fraudulent practices."); Green v. Hamilton Int'l Corp., 437 F.Supp. at 728-29 (addressing claims arising from the plaintiffs' redemption of convertible debentures: "Furthermore, there can be no doubt that [Rule 10b-5's] prohibition against `insider' trading extends to a corporation."). All of these cases involve a corporation purchasing securities from other parties, and do not involve the disclosure duties of a corporation engaged in a public offering or Security Act claims.

The Plaintiffs also rely on Shaw v. Digital Equipment Corp., to argue that the "abstain or disclose" rule applies under Sections 11 of the Securities Act. While the United States Court of Appeals for the First Circuit "analogiz[ed]" to the abstain-or-disclose rule to elaborate on the policy underlying Securities Act's disclosure requirements, it did not incorporate the doctrine into the Securities Act; rather, it "look[ed] to the explicit statutory and regulatory framework to determine whether the Securities Act provides such a mechanism [as the abstain-or-disclose rule of insider trading law]":

82 F.3d at 1203-04 (other citations omitted)(emphasis added). The First Circuit held that, pursuant to Section 11, an issuer in possession of nonpublic information was required to disclose interim financial information where, at the time the prospectus became effective, the interim results represented "an extreme departure from the range of results which could be anticipated based on currently available information.'" Shaw v. Digital Equip. Corp., 82 F.3d at 1210. See In re Turkcell Iletisim Hizmetler A.S. Sec. Litig., 202 F.Supp.2d 8, 12 (S.D.N.Y.2001)(quoting the same statement from Shaw v. Digital Equipment Corp.).

Thus, contrary to the Plaintiffs' argument that the abstain-or-disclose rule applies to Section 11 and public offerings, the First Circuit "look[ed] to the explicit statutory and regulatory framework to determine" the defendants' disclosure duties. Accordingly, in J & R Marketing, SEP v. General Motors Corp., the United States Court of Appeals for the Sixth Circuit observed that "the First Circuit went on to do what we have done above: look to the statutes and regulations detailing what must be included in a registration statement and determine whether the information plaintiffs claim should have been included falls under those rules." 549 F.3d at 397. The Sixth Circuit in J & R Marketing, SEP v. General Motors Corp. made explicit what is implicit in the First Circuit's reasoning in Shaw v. Digital Equipment Corp., concluding that courts are "not authorized to impose a wide-ranging duty to disclose anything that a person can allege was nonpublic, material information." 549 F.3d at 397. The Plaintiffs in essence ask the Court to extend the abstain-or-disclose rule outside of the insider trading context to all securities sales, which would in effect require the disclosure of all material information. Neither the Securities Act, nor the Exchange Act, nor courts impose such a broad requirement. See Shaw v. Digital Equip. Corp., 82 F.3d at 1202 ("[T]he mere possession of material nonpublic information does not create a duty to disclose it."); Glazer v. Formica Corp., 964 F.2d 149, 156 (2d Cir. 1992)("The materiality of the information claimed not to have been disclosed ... is not enough to make out a sustainable claim of securities fraud. Even if information is material, there is no liability under Rule 10b-5 unless there is a duty to disclose it.")(quoting Backman v. Polaroid Corp., 910 F.2d 10, 12 (1st Cir.1990)); In re Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 641 n. 17 (3d Cir.1989) ("Disclosures mandated by law are presumably material.... However, when defendants voluntarily disclose information, they have a duty to disclose additional material facts only to the extent that the volunteered disclosure was misleading as to a material fact."); Harborview Master Fund, LP v. Lightpath Techs., Inc., 601 F.Supp.2d 537, 543-44 (S.D.N.Y.2009) ("[T]he mere possession of material non-public information does not create a disclosure duty."); SEC v. Autocorp Equities, Inc., No. 2:98-CV-00562 PGC, 2004 WL 1771608, at *3 (D.Utah Aug. 4, 2004) (finding, in a 10b-5 case, certain information material and then analyzing whether there was a duty to disclose it); Karacand v. Edwards, 53 F.Supp.2d 1236, 1245 (D.Utah 1999) ("Materiality alone is not sufficient to place a company under a duty to disclose") (citing In re Sofamor Danek Group, Inc., 123 F.3d 394, 400 (6th Cir.1997)). See also D. Langevoort & G. Gulati, The Muddled Duty to Disclose Under Rule 10b-5, 57 Vand. L.Rev. 1639, 1645 (2004) ("[N]ot all material information has to be disclosed."). Moreover, such a broad standard would render nugatory the statutes and regulations dictating with specificity what information a securities issuers must disclose. So broad a standard would also ignore the Supreme Court's analysis in Basic v. Levinson expressing concern that "[d]evising two different standards of materiality, one for situations where insiders have traded in abrogation of their duty to disclose or abstain ..., and another covering affirmative misrepresentations by those under no duty to disclose ..., would effectively collapse the materiality requirement into the analysis of defendant's disclosure duties." 485 U.S. at 241 n. 18, 108 S.Ct. 978 (emphasis added). The Court therefore rejects the Plaintiffs' argument that the abstain-or-disclose rule applies here.

B. THE COURT WILL RECONSIDER WHETHER ITEM 303 OF REGULATION S-K IMPOSES A DISCLOSURE DUTY ON THE DEFENDANTS.

The Plaintiffs assert that,

Memorandum at 9. The Plaintiffs request the Court to "reconsider its silence on the affirmative disclosure obligations imposed on Defendants by Regulation S-K." Memorandum at 9. The Court will reconsider the obligations that Regulation S-K imposes on the Defendants.

Regulation S-K governs the disclosure requirements of registration statements, periodic reports, and annual reports filed with the SEC. See 17 C.F.R. § 229.10. Item 303 of Regulation S-K, 17 C.F.R. § 229.303, requires the independent disclosure of specific information in prospectuses and registration statements. Item 303 of Regulation S-K requires the disclosure of, among other things, "any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant's liquidity increasing or decreasing in any material way," and "any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations." 17 C.F.R. §§ 229.303(a)(1) & (a)(3)(ii). Breaching the duty to disclose under Item 303 of Regulation S-K can give rise to a claim under the Securities Act. See Steckman v. Hart Brewing, Inc., 143 F.3d at 1296 ("[A]llegations which sufficiently state a claim under Item 303 also state a claim under section 11 [of the Securities Act and a]llegations which would support a claim under Item 303(a)(3)(ii) are sufficient to support a claim under section 12(a)(2)."); In re Scholastic Corp. Sec. Litig., 252 F.3d at 70-73 (reversing dismissal of claims arising under Section 10(b) of the Exchange Act where the plaintiffs adequately pled violation of Item 303 of Regulation S-K); J & R Marketing, SEP v. Gen. Motors Corp., 549 F.3d at 392 (holding that registrants' disclosure obligations under Section 11 include duty under Item 303 to make forward-looking projections regarding information known to registrant); Garber v. Legg Mason, Inc., 537 F.Supp.2d at 611 ("An omission of fact `required to be stated' under Item 303 will generally produce liability under section 11.")(quoting In re Initial Pub. Offering Sec. Litig., 358 F.Supp.2d at 211); Milman v. Box Hill Sys. Corp., 72 F.Supp.2d at 231 (denying motion to dismiss the plaintiffs' claims under Sections 11 and 12(a)(2) of Securities Act where the plaintiffs sufficiently pled violation of Item 303).

In a recent case, the Second Circuit reversed a district court's dismissal of a securities class action complaint. The Second Circuit stated:

Litwin v. Blackstone Group, L.P., 634 F.3d at 716. Accordingly, the Court concludes that a violation of the duty to disclose under Item 303 may be actionable under Section 11 of the Security Act. Because the Plaintiffs have not established a violation of Item 303, the Court need not decide whether every violation is necessarily also a violation of Section 11. To state a claim based on Item 303, a plaintiff must make a plausible showing that (i) there exists a (i) known (ii) "trend, event, or uncertainty" (iii) that is "reasonably likely" to be material under Item 303, and in turn the Securities Act. While the Court reconsiders the duties Regulation S-K imposes, those duties do not alter the Court's holdings in its orders.

C. THE PLAINTIFFS HAVE NOT ALLEGED FACTS ESTABLISHING THAT THE DEFENDANTS VIOLATED THEIR DUTY TO DISCLOSE UNDER ITEM 303.

The Plaintiffs ask the Court to reconsider portions of its orders based on their allegations that the Defendants violated their duties under Item 303 of Regulation S-K. The Plaintiffs argue that the Defendants' failure to disclose trends that were reasonably likely to have a material adverse impact on TMI's liquidity violates Item 303 of Regulation S-K, and gives rise to liability under the Securities Act and the Exchange Act. The Plaintiffs contend that: (i) the "Defendants had an affirmative duty under Item 303 of Regulation S-K to disclose the litany of liquidity problems then facing the Company which, individually and collectively, had a material adverse impact on TMI's liquidity position"; and (ii) the "Defendants' failure to disclose these known adverse liquidity trends constituted a breach of that duty." Memorandum at 10. Specifically, the Plaintiffs assert that Item 303 of Regulation S-K required the Defendants to disclose: (i) TMI's increased reliance on RPA financing; (ii) TMI's $2.9 billion dollar portfolio of purchased MBS backed by Alt-A mortgages, which was used as collateral to secure TMI's RPAs—and therefore raised the likelihood of margin calls as a result of unprecedented deterioration in the Alt-A market; and (iii) the existence of cross-default provisions in its RPA contracts, and the likelihood that such provisions would be triggered as a result of the deterioration in the market value of the toxic Alt-A-backed assets used to secure these agreements during a time when the Alt-A market was under severe distress. The Plaintiffs contend that TMI's SEC filings represented that it financed its ARM assets through CDOs, ABCP, and RPAs, and that historically the diversity of TMI's funding sources gave it flexibility in maintaining the liquidity it business model demanded. See TMI, 2007 Form 10-K Annual Report, at 21 (dated February 28, 2008)(noting that, if TMI was unable to refinance its ABCP and RPA facilities, its "liquidity and capital resources could be materially adversely affected"). The Plaintiffs argue that these alleged violations are actionable under the Securities Act and the Exchange Act. See Memorandum at 12-22, 30-31. The Court concludes, however, that the Defendants did not violate their disclosure obligations under Item 303.

1. TMI Did Not Have a Duty to Disclose its Alleged Increased Reliance on RPA Financing.

Relying on facts in the SAC, the Plaintiffs assert that "by May 26, 2007 there existed such severe disruption in the ABCP markets that Thornburg Mortgage Finance, LLC, a subsidiary TMI formed in 2007 to purchase whole loans and issue ABCP, never became operational." Memorandum at 15. The Plaintiffs further contend in their Memorandum that, "[u]nbeknownst to investors, by the time of the June 2007 Offering, the Company had completely lost access to the ABCP market." Memorandum at 15. In essence, the Plaintiffs contend that TMI failed to disclose a trend of an unspecified "severe disruption in the ABCP markets" in "[t]he June 2007 Offering Documents, which became effective on or about June 19, 2007." Memorandum at 16.

The Plaintiffs' arguments are unavailing for a number of reasons. First, the new facts are untimely, because they were available to the Plaintiffs when they filed the CCAC. See Memorandum at 3 ("The SAC includes new facts which explain that, by May 2007, extreme disruptions in the asset-backed commercial paper market ("ABCP") market had already foreclosed it as a viable financing option for Defendants...."). TMI disclosed the existence and non-use of Thornburg Mortgage Finance, LLC—the ABCP facility referred to in the bankruptcy filing—through its August 8, 2007 Form 10-Q. See Thornburg Mortgage, Inc., Quarterly Report (Form 10-Q) at 20 (dated August 8, 2007), filed August 23, 2010 (Doc. 327-6) ("In the second quarter of 2007, the Company established a $3.5 billion Whole loan-collateralized CP facility.... At June 30, 2007, no such notes had been issued, but the Company expects to utilize the facility prior to December 31, 2007."). The fact of TMI's non-use of its ABCP facility and whatever implications flow therefrom were thus disclosed and available to the Plaintiffs long before they filed the CCAC. A motion for reconsideration is an "inappropriate vehicle[] to reargue an issue previously addressed by the court when the motion merely advances ... supporting facts which were available at the time of the original motion." Servants of Paraclete v. Does, 204 F.3d at 1012.

Second, despite the Plaintiffs' characterization in their Memorandum that TMI "had completely lost access to the ABCP market" at "the time of the June 2007 Offering," Memorandum at 15, neither the SAC nor the CCAC contain such an allegation. See Issa v. Comp USA, 354 F.3d 1174, 1179 (10th Cir.2003) ("[P]laintiff may not rely on the allegations in his ... brief to supplement his complaint...."). The Plaintiffs cite in support of their allegation paragraphs 17 and 174 of the SAC. These paragraphs provide:

SAC ¶¶ 17, 174, at 7, 57-58 (footnotes omitted) (italicized material is new to the SAC). Contrary to the assertion in the Memorandum, nowhere in the SAC do the Plaintiffs allege that TMI faced a "complete loss" of ABCP financing at anytime before the June 19, 2007 offering. The SAC includes only the assertion that a disruption impacted a TMI subsidiary that was never operational, and the threadbare allegation that, "no later than June 2007, TMI and the Individual Defendants knew, but failed to disclose, that the ABCP market was shrinking rapidly." SAC ¶ 17, at 7. "Moreover, judicially noticeable documents refute the assertion that TMI faced a "complete loss" of ABCP financing." According to TMI's Form 10-Q for that quarter:

Thornburg Mortgage, Inc., Quarterly Report (Form 10-Q) at 19 (dated August 8, 2007), filed August 23, 2010 (Doc. 321-3) (emphasis added).23

Third, even if the Plaintiffs had alleged the Defendants were blocked from accessing the ABCP market before June 19, 2007, it would not save their Complaint. The Plaintiffs rely on events occurring between May 26, 2007 and June 19, 2007 to establish "an adverse liquidity trend that Item 303 required Defendants to disclose in the June 2007 Offering Documents."24 Motion at 16. Under Item 303, a "trend" requires "an assessment of whether an observed pattern accurately reflects persistent conditions of the particular registrant's business environment." Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1191 (11th Cir.2002) ("It may be that a particular pattern is, for example, of such short duration that it will not support any conclusions about the registrant's business environment."). Under caselaw interpreting Item 303, the approximately three-week span between May 26, 2007 and June 19, 2007 is insufficient to establish a trend. See Kapps v. Torch Offshore, Inc., 379 F.3d 207, 221 (5th Cir.2004) (affirming dismissal, and holding that a 60% decline in natural gas prices occurring five and one-third months immediately preceding an IPO did not establish a trend under Item 303); Blackmoss Investments Inc. v. ACA Capital Holdings, Inc., No. 07 Civ. 10528, 2010 WL 148617, at *10 (S.D.N.Y. Jan. 14, 2010) ("As a matter of law, a two month period of time does not establish a `trend' for purposes of the disclosures required by Item 303." (citations omitted)); Zucker v. Quasha, 891 F.Supp. 1010, 1015 (D.N.J. 1995) ("[D]ata concerning a quarter that is in progress is necessarily incomplete."), aff'd, 82 F.3d 408 (Table) (3d Cir.1996).

In Kapps v. Torch Offshore, Inc., the United States Court of Appeals for the Fifth Circuit rejected the appellant's contention that an issuer should have disclosed a sixty-percent decline in natural gas prices occurring five and one-third months immediately preceding an IPO. The plaintiff argued that the issuer "should have mentioned the noted decrease in the price of natural gas because it was a trend that could reasonably be expected to have a material impact on Torch's operations, and therefore its disclosure was required pursuant to Item 303 of the SEC Regulation S-K; 17 C.F.R. § 229.303." 379 F.3d at 211. The Fifth Circuit stated:

379 F.3d at 218, 220-21 (footnotes omitted)(emphasis added). Similarly, uncontested portions of TMI's SEC filings reported that, "[a]s of June 30, 2007 and December 31, 2006, the Company had $8.2 billion and $8.9 billion, respectively, of Asset-backed CP outstanding." Thornburg Mortgage, Inc., Quarterly Report (Form 10-Q) at 19. The alleged three-week-old disruptions in the ABCP market did not provide a "complete picture," 379 F.3d at 221, that allowed "assessment of whether an observed pattern accurately reflect[ed] persistent conditions of [TMI's] business environment," Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d at 1191.

Finally, the Plaintiffs' fail to allege that the Defendants had actual knowledge of the ABCP market trends. Item 303 requires disclosure only of "known trends, uncertainties, demands, commitments or events." 17 C.F.R. § 229.303(a)(3)(ii)(emphasis supplied). "While it is true that Section 11 claims generally do not require pleading scienter, Item 303's requirement of knowledge requires that a plaintiff plead, with some specificity, facts establishing that the defendant had actual knowledge of the purported trend." Blackmoss Invs. Inc. v. ACA Capital Holdings, Inc., 2010 WL 148617, at *9 (emphasis added). See J & R Mktg. v. Gen. Motors Corp., 549 F.3d at 391 (dismissing complaint where allegations demonstrated information was knowable, not known, to defendants, because "duty of disclosure arising from Item 303 does require knowledge"); Garber v. Legg Mason, Inc., 537 F.Supp.2d at 614 (holding that Item 303 requires trend to be known and rejecting argument "that pleading a trend's existence is enough to support a claim"); Panther Partners Inc. v. Ikanos Commc'ns, Inc., 538 F.Supp.2d at 673 (S.D.N.Y.2008)(dismissing claim of noncompliance with Item 303 where "requisite knowledge during the time period in question is clearly absent" (internal quotation marks omitted)).

The Plaintiffs add the allegation to the SAC that, "[b]y no later than June 2007, TMI and the Individual Defendants knew, but failed to disclose, that the ABCP market was shrinking rapidly and, by July 2007, had completely `dried up.'" SAC ¶ 17, at 7 (italicized material is new to the SAC). The Plaintiffs fail to differentiate between the Defendants, robbing their assertion of plausibility. See Atuahene v. City of Hartford, 10 Fed.Appx. 33, 34 (2d Cir.2001)("By lumping all the defendants together in each claim and providing no factual basis to distinguish their conduct, [the] complaint failed to satisfy [the] minimum standard [of Rule 8]."); Lewis v. Strong, No. 09-cv-02861, 2010 WL 2232359, at *2 n. 2 (D.Colo. June 2, 2010) ("Although the Amended Complaint makes generalized, undifferentiated references to `defendants,' such global allegations are insufficient to provide fair notice, as required by Fed.R.Civ.P. 8(a), that any particular defendant had actual or constructive knowledge of plaintiff's complaints."); MSGI Sec. Solutions, Inc. v. Hyundai Syscomm Corp., No. C 09-03330, 2009 WL 4254457, at *3 (N.D.Cal. Nov. 24, 2009) (granting motion to dismiss where, as here, "the undifferentiated incorporation of all the general allegations into each claim and the lumping together of the defendants renders it impossible to determine whether the elements of each claim have been met as to any much less all defendants"). The Court therefore concludes that the Plaintiffs have not set forth allegations establishing that the Underwriter Defendants' failed to disclose a trend towards illiquidity, in violation of Item 303.

2. TMI Adequately Disclosed it Held a $2.9 Billion Dollar Portfolio of Purchased MBS Backed by Alt-A Mortgages.

The Plaintiffs further contend that "TMI's Alt-A holdings and their impact on the Company's RPAs," Memorandum at 18, "constituted trends which were `reasonably likely' to adversely impact the Company's liquidity, and were required to be disclosed under Item 303 but were not," Memorandum at 18. The Plaintiffs assert:

Motion at 17-18 (citations to the record omitted). The Plaintiffs further contend that TMI's failure to disclose the its Alt-A holdings makes the failure to disclose the cross-default provisions in its RPA agreements actionable under Item 303, because

Memorandum at 18. The Plaintiffs argue that "[a]ll of these facts constituted trends which were `reasonably likely' to adversely impact the Company's liquidity, and were required to be disclosed under Item 303 but were not." Motion at 18.

The Plaintiffs also request that the Court "reconsider its dismissal of Plaintiffs' Securities Act Claims in light of the affirmative disclosure obligations of Regulation S-X." Memorandum at 24. Regulation S-X, 17 C.F.R. § 210.4-01 requires financial statements which are filed with the SEC to be in compliance with GAAP. See 17 C.F.R. § 210.4-01(a)(1)("Financial statements filed with the Commission which are not prepared in accordance with generally accepted accounting principles will be presumed misleading or inaccurate, despite footnotes or other disclosures, unless the Commission has otherwise provided."). In part, Regulation S-X requires the disclosure of "significant concentrations of credit risk arising from all financial instruments, whether from an individual counterparty or groups of counterparties." FAS at ¶ 15A (emphasis in original, footnote omitted). The Plaintiff contend that "GAAP required the disclosure of TMI's concentration of Alt-A backed MBS, and Defendants' omission of such information therefore constitutes a violation of Regulation S-X." Memorandum at 25.

Contrary to the Plaintiffs' assertion, however, TMI disclosed that its ARM portfolio included billions of dollars in Alt-A holdings and that its ARM portfolio secured its RPA financing. The Plaintiffs define "Alt-A loans" as "`alternatives' to the gold standard of conforming, GSE-backed mortgages." CCAC ¶ 98, at 29. They explain that "[o]ften an Alt-A borrower is unable to provide the proof of income or the verification of assets necessary to obtain a prime mortgage, but has a satisfactory credit score, or vice versa." CCAC ¶ 98, at 29; SAC ¶ 13, at 5. See SAC ¶ 162, at 52 (identifying loans for which a borrower is not required to document income as "stated income" loan and labeling such loans as at least one type of "Alt-A" loan). TMI disclosed its acquired and originated "[s]tated income/no ratio" loans to investors. TMI provided charts setting forth detailed information concerning its originated loan portfolio in its quarterly 10-Q filings. See, e.g., First Quarter 2007 10-Q, at 39 (filed May 9, 2007); Second Quarter 2007 10-Q, at 39 (filed Aug. 8, 2007). These charts gave investors detailed information about its ARM portfolios, including data on the percentage of "Full" documentation versus "[s]tated income/no ratio" loans, the loan-to-value ratios of the loans, the FICO scores associated with the loans, and the geographic distribution of the loans. See, e.g., First Quarter 2007 10-Q, at 39; Second Quarter 2007 10-Q, at 39. TMI likewise disclosed the "Alt-A" nature of its acquired loans. As with its originated loans, TMI's quarterly 10-Q filings included charts offering these same, extensive details about the nature of the acquired loans. See, e.g., First Quarter 2007 10-Q at 40; Second Quarter 2007 10-Q at 40. In its Second Quarter 2007 10-Q, TMI disclosed that, as of June 30, 2007, 11.1% of its $17.1 billion in originated ARM loans—equaling $2.7 billion—and 42.2% of its $7.4 in acquired ARM loans-equaling $3.1 billion-were "[s]tated income/no ratio" loans. In sum, TMI's Second Quarter 2007 10-Q revealed that its ARM portfolio included $5.8 billion in Alt-A loans. See Second Quarter 2007 10-Q, at 39-40. TMI further disclosed that it "securitize[d][its] acquired and originated ARM Loans," e.g., 2006 Annual 10-K at 25 (filed Mar. 1, 2007); First Quarter 2007 10-Q at 27; Second Quarter 2007 10-Q at 26 (filed August 8, 2007), and that "ARM Assets" served as the collateral for its RPAs, e.g., 2006 Annual 10-K at 37 ("[W]e borrow money under reverse repurchase... agreements based on the fair value of our ARM Assets...."; "ARM Assets ... collateralized the Reverse Repurchase Agreements ...."; "our borrowing ability under these agreements [RPAs] may be limited and lenders may initiate margin calls in the event ... the value of our ARM Assets declines....").25 Consequently, TMI disclosed its exposure to billions of dollars in Alt-A ARM loans and that those loans collateralized its RPAs. The Plaintiffs' claims that are founded on the Defendants' alleged failure to disclose its Alt-A holdings therefore fail.

Additionally, TMI notified investors that it might underwrite Alt-A mortgages:

Thornburg Mortgage, Inc., Form 10-K (Annual Report) at 8 (dated February 28, 2007), filed September 23, 2008 (Doc. 134-2). "The Court has already held that TMI's Form 10-K's adequately placed investors on notice" that "TMI underwrote and acquired some Alt-A assets." MOO at 1258.

Moreover, even if TMI had not disclosed its Alt-A holdings, that failure would not have been material in light of its extensive disclosures about its liquidity problems. TMI disclosed that it was exposed to liquidity constraints and potential shortfalls, and also that it in fact had fallen victim to exactly those financial realities. TMI disclosed that the "severe pressure" of financing markets, the "not functioning" ABCP market, the "sudden[] and unexpected[]" decline in MBS market prices, and the "[a]dverse[]" liquidity effects of these "significant" disruptions forced TMI's August 2007 sale of a substantial percentage of its assets and necessitated the September 2007 recapitalization offerings. September 2007 Prospectus at S-4 (filed September 4, 2007). As FBR points out, TMI disclosed the following:

FBR Response at 7-9. Consequently, even if TMI had not disclosed its Alt-A holdings—which it did—the failure to disclose would not have been material in light of TMI's disclosures about its liquidity difficulties. See Grossman v. Novell, Inc., 120 F.3d at 1119-20 (stating that an alleged omission is only material where "a reasonable investor would consider it important in determining whether to buy or sell stock"; whether alleged omission material "depends on other information already available to the market," including whether "other documents available to the investing public `bespoke caution' about the subject matter of the alleged misstatement at issue" (citations omitted)). TMI revealed its actual, realized liquidity issues and that it might not be able to recover from them in the future. In light of these disclosures, there is no "substantial likelihood" that TMI's alleged failure to disclose the extent of its Alt-A holdings "would have been viewed by the reasonable investor as having significantly altered the `total mix' of information made available." TSC Indus., Inc. v. Northway, Inc., 426 U.S. at 449, 96 S.Ct. 2126. See McDonald v. Kinder-Morgan, Inc., 287 F.3d at 997 (stating that courts should "not hesitate to dismiss securities claims pursuant to Rule 12(b)(6) where the alleged misstatements or omissions are plainly immaterial" (quotation marks omitted)). The Plaintiffs' contention that "[i]nvestors were deprived of all of the important details regarding these adverse liquidity trends, and were unable to make informed investment decisions as a result," Memorandum at 4, is unavailing in the face of TMI's disclosure of its Alt-A holdings and its liquidity problems. For these same reasons, the Court will not reconsider its decision that TMI's "disclosure of `case by case' underwriting exceptions" sufficiently "warn[ed] investors of the billions of dollars in purchased and/or acquired Alt-A-backed MBS TMI held on its balance sheet." Memorandum at 19.

3. TMI Was Not Obligated to Disclose the Existence of Cross-Default Provisions in its RPA Contracts.

The Plaintiffs "request that the Court reconsider its decision, and find that Item 303 required disclosure of the cross-default provisions." Memorandum at 22. In its Memorandum Opinions and Orders, the Court held that the Defendants were not required to disclose contractual provisions that the Plaintiffs had not alleged were uncommon:

Individual Defendant MOO at 1222-23. The disclosure obligations Item 303 imposes does not change the Court's analysis. The essence of the Court's holding is that the cross-default provisions are not material, because it is generally unreasonable to demand an issuer disclose every contractual provision in the event that one becomes operative. See Lane v. Page, 581 F.Supp.2d 1094, 1121 (D.N.M.2008)(Browning, J.)("A proxy statement need not reveal every detail involved in a transaction; it only needs to paint a `sufficiently accurate picture so as not to mislead.'") (quoting Kennecott Copper Corp. v. Curtiss-Wright Corp., 584 F.2d 1195, 1200 (2d Cir.1978)); Lane v. Page, 581 F.Supp.2d at 1125 ("If every piece of arguably relevant information needed to be disclosed in a proxy statement, investors and shareholders would be flooded with information and the purposes of disclosure would be defeated.") (citing In re Ford Motor Co. Secs. Litig., 381 F.3d 563, 569 (6th Cir.2004)). Because the Court held that the omission was not material, it is of no moment whether Item 303 required disclosure. Moreover, in light of the TMI's extensive disclosures about its liquidity problems, the Defendants failure to disclose all of the provisions in its contracts does not amount to a violation of Item 303 requirement that issuers disclose "any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant's liquidity increasing or decreasing in any material way," and "any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations," 17 C.F.R. §§ 229.303(a)(1) & (a)(3)(ii), because disclosing every contract provision would overwhelm investors, defeating the purpose of the disclosure requirements. Cf. Grossman v. Novell, Inc., 120 F.3d at 1119-20 (stating that an alleged omission is only material where "a reasonable investor would consider it important in determining whether to buy or sell stock"; whether alleged omission material "depends on other information already available to the market," including whether "other documents available to the investing public `bespoke caution' about the subject matter of the alleged misstatement at issue" (citations omitted)). The Court therefore will not alter its decision that "failure to disclose a contract provision, without alleging that the provision is unique, cannot constitute a material omission." Amended MOO at 1222-23.

II. THE COURT WILL NOT CHANGE ITS DECISION THAT TMI'S 2007 FORM 10-K WAS NOT ACTIONABLE, BECAUSE THE PLAINTIFFS PROVIDE NO BASIS FOR RECONSIDERATION AND NO NAMED PLAINTIFF HAS STATUTORY STANDING TO CHALLENGE THE JANUARY 2008 OFFERING.

The Plaintiffs request that the Court reconsider its holding that TMI's 2007 Form 10-K was not actionable. "The Court issued this ruling notwithstanding the fact that TMI's internal auditor, KPMG, stated in a March 4, 2008 letter to TMI that its year-end financials contained material misstatements." Memorandum at 22-23. The Court held:

Memorandum Opinion and Order at 29-30.

The Plaintiffs argue that "the restatement was an acknowledgment by TMI that the Company was experiencing such a severe liquidity crisis by December 31, 2007 that the possibility existed that it would not be able to continue as a going concern." Memorandum at 24. The Plaintiffs assert that this information should have been disclosed before the January 9, 2008 Offering. The Plaintiffs present no new law or facts to support their contention that the Court should reconsider its decision that that TMI's 2007 Form 10-K was not actionable. Rather, the Plaintiffs merely disagree with the Court's holding. Rather than setting forth "[g]rounds warranting a motion to reconsider," such as "(1) an intervening change in the controlling law, (2) new evidence previously unavailable, [or] (3) the need to correct clear error or prevent manifest injustice," Servants of Paraclete v. Does, 204 F.3d at 1012, the Plaintiffs state that they disagree with the Court's conclusion. The Court therefore denies their request that it alter its decision.

Moreover, the Plaintiffs lack statutory standing to challenge the January 2008 offering—the only offering the Plaintiffs' contention of a December 31, 2007 liquidity crisis would implicate. See Memorandum at 24 ("[B]y TMI's own admission, [it] was required to be disclosed by December 31, 2007—prior to the January 9, 2008 Offering."). In their motion to dismiss, the Underwriter Defendants asserted that the Plaintiffs lack standing to assert their Section 11 and Section 12(a)(2) claims, both under Sections 11 and 12(a)(2) of the Securities Act and under Article III of the United States Constitution. See May/June Underwriters' Motion at 11-13; UBS Motion at 2; FBR Motion at 11-15. The Court held that it had subject-matter jurisdiction over the Plaintiffs' claims, because the Plaintiffs had Article III standing. The Court also noted that no Lead Plaintiff had purchased securities from TMI in the September 2007 or January 2008 offerings. The Court stated:

MOO at 1253-255. The Court did not address whether it should dismiss the Plaintiffs' claims based on the September 2007 and January 2008 offerings. The Court did not need resolve the statutory standing issue, because the Court dismissed the claims against the Underwriter Defendants on other grounds.

The Court subsequently granted the Plaintiffs leave to amend their pleading to add an additional class representative, Boilermakers Lodge. See Memorandum Opinion and Order, filed February 27, 2010 (Doc. No. 266)(Granting Plaintiffs' Opposed Motion for Leave to amend Consolidated Class Action Complaint to Add Additional Representative Plaintiff, filed January 27, 2009 (Doc. 160)). The Plaintiffs added Boilermakers Lodge to the case to address their statutory standing defects that the September 2007 and January 2008 Underwriter Defendants—FBR, UBS, and Bear Stearns—noted in their motions to dismiss. Boilermakers Lodge alleges that it purchased TMI stock directly from FBR as part of the September 2007 Offering. February 27, 2010 MOO, 265 F.R.D. at 578. Boilermakers Lodge does not allege, however, that it purchased any TMI stock in the January 2008 Offering. Thus, the addition of Boilermakers Lodge to the case does not cure plaintiffs' lack of statutory standing to sue based on the January 2008 offering, or to sue UBS and Bear Stearns.

UBS, and Bear Stearns renew their request that, if the Court reconsiders its decision that TMI's 2007 Form 10-K was not actionable, the Court dismiss the UBS and Bear Stearns, because the Plaintiffs have not cured their lack of statutory standing for their claims based on the January 2008 offerings. The Court agrees that the Plaintiffs have failed to add a named plaintiff that purchased securities during the January 2008 offering, and that the Plaintiffs therefore lack statutory standing to bring claims based on the January 2008 offerings. UBS and Bear Stearns note that, "in the months following this Court's dismissal of the CCAC and Boilermakers Lodge's entry into the litigation, numerous district courts have dismissed purported class claims brought under Section 11 where none of the named plaintiffs purchased securities in one or more of the offerings covered by the complaint." UBS and Bear Stearns Response at 3-4 (citing In re Wells Fargo Mortgage-Backed Certificates Litig., No. C 09-01376 SI, 2010 WL 1661534, at *3 (N.D.Cal. Apr. 22, 2010)) (dismissing Securities Act claims for lack of standing: "[C]ourts considering class action complaints under Section 11 have overwhelmingly held that the lead plaintiffs named in the complaint lack standing to challenge any offering through which no lead plaintiff actually purchased a security." (citations omitted)); In re Lehman Brothers Sec. and Erisa Litig., 684 F.Supp.2d 485, 491 (S.D.N.Y.2010)(dismissing for lack of standing Section 11 claims arising out of eighty-five of the ninety-four offerings that the complaint covered, because no named plaintiff purchased securities in those offerings); N.J. Carpenters Vacation Fund v. Royal Bank of Scotland Grp., No. 08 CV 5093(HB), 2010 WL 1172694, at *8 (S.D.N.Y. Mar. 26, 2010) (dismissing Section 11 claims arising out of thirteen of the fifteen securities offerings that the complaint covered where no named plaintiff purchased in those offerings); N.J. Carpenters Health Fund v. DLJ Mortgage Capital, Inc., No. 08 Civ 5653(PAC), 2010 WL 1473288, at *4 (S.D.N.Y. Mar. 29, 2010)(dismissing Section 11 claims arising out of three of four offerings); N.J. Carpenters Health Fund v. Residential Capital, LLC, No. 08 CV 8781(HB), 2010 WL 1257528, at *4 (S.D.N.Y. Mar. 31, 2010)(dismissing Section 11 claims: "Plaintiffs were not harmed by alleged misstatements and omissions related to the fifty-five offerings that they did not purchase."); City of Ann Arbor Employees' Retirement Sys. v. Citigroup Mortgage Loan Trust Inc., No. CV 08-1418, 2010 WL 1371417, at *7 (E.D.N.Y. Apr. 6, 2010)(dismissing Section 11 claims relating to "sixteen Prospectus Supplements issued in connection with securities that Plaintiffs did not purchase"); In re IndyMac Mortgage-Backed Sec. Litig., No. 09 Civ. 4583(LAK), 2010 WL 2473243, at *3 (S.D.N.Y. June 21, 2010) ("[N]amed plaintiffs have standing only with respect to the offerings in which they purchased securities. In consequence, the claims based on the offerings in which named plaintiffs have not purchased are dismissed."); In re Morgan Stanley Mortgage Pass-Through Certifs. Litig., No. 09 Civ. 2137(LTS)(MHD), 2010 WL 3239430, at *5 (S.D.N.Y. Aug. 17, 2010)(dismissing Section 11 claims concerning certificates it did not purchase, noting plaintiff "lacks standing to pursue its claims concerning any certificates other than [the one it purchased]").

The Plaintiffs contend that "the cases cited by UBS and Bear Steams are distinguishable from this matter, because they involve offerings of MBS and other financial products, not common stock offerings by publicly-traded companies." Reply at 45 The Plaintiffs argue that they "possess standing to bring claims in connection with the January 2008 Offerings because the misstatements alleged by Plaintiffs were incorporated by reference into a shelf registration statement that was common to all of the Offerings." Reply at 45. (citing In re Juniper Networks, Inc. Sec. Litig., 542 F.Supp.2d 1037, 1052 (N.D.Cal.2008); Schwartz v. Celestial Seasonings, Inc., 178 F.R.D. 545, 557 (D.Colo.1998); In re Storage Tech. Corp. Sec. Litig., 630 F.Supp. 1072, 1078 (D.Colo.1986)). The Plaintiffs contend that In re Countrywide Fin. Corp. Sec. Litig., 588 F.Supp.2d 1132, 1164 (C.D.Cal.2008), stands for the proposition that a

Reply at 45 n. 32 (emphasis added).

In re Citigroup, Inc. Bond Litig., 723 F.Supp.2d 568, 584 (S.D.N.Y.2010).

The Plaintiffs argue that TMI's earlier filing specific to the May, June, and September 2007 offerings were retroactively incorporated into the shelf statement, which was then prospectively incorporated the January 2008 filing. The Plaintiffs contend that the May, June, and September 2007 offerings were actionable largely for the reasons that the Court rejected in Section I, supra. The Plaintiffs' argument is unavailing, because no reasonable investor would rely on TMI's earlier statements in the face of its intervening disclosures about its financial hardships and in light of the upsets in the relevant markets. The Court does not believe that the statements in prior offerings, although incorporated retroactively into the shelf statement and thereby prospectively into the January 2008 offering, are "materially false and misleading at each effective date," Reply at 45 n. 32 (emphasis added), when a company extensively discloses intervening hardships resulting from well-known market troubles, see Grossman v. Novell, Inc., 120 F.3d at 1119-20 (stating that an alleged omission is only material where "a reasonable investor would consider it important in determining whether to buy or sell stock"; whether an alleged omission is material "depends on other information already available to the market," including whether "other documents available to the investing public `bespoke caution' about the subject matter of the alleged misstatement at issue" (citations omitted)). The Plaintiffs' reliance on cases finding standing to challenge offerings based on common shelf statements without intervening disclosures of financial hardship of market troubles are inapposite. Cf. In re Citigroup, Inc. Bond Litig., 723 F.Supp.2d at 574 (holding that plaintiffs possessed statutory standing to assert Section 11 claims in connection with forty-eight public offerings between May 2006 and August 2008, notwithstanding that they purchased securities in only nineteen of the forty-eight offerings, where misstatements were traceable to common shelf registration statement); In re Am. Int'l Grp., Inc. 2008 Sec. Litig., 741 F.Supp.2d 511, 537 (S.D.N.Y.2010)(finding that the plaintiffs possessed standing to challenge undisclosed risks in offerings between March 2006, and September 2008, where claims were "premised on statements or alleged omissions in company reports that had been incorporated by reference in each of the registration statements at issue").

The Court therefore will not change its decision that TMI's 2007 Form 10-K is not actionable, because the Plaintiffs set forth no new challenges to its holding. Moreover, no named plaintiff purchased TMI shares during the January 2008 offering. Accordingly, the Court also rejects the Plaintiffs' request that it change its decision that TMI's 2007 Form 10-K is not actionable for lack of statutory standing.

III. THE COURT WILL NOT RECONSIDER ITS RULING THAT CERTAIN STATEMENTS CONSTITUTED INACTIONABLE PUFFERY.

The Plaintiffs request that the Court reconsider its ruling that certain statements constituted inactionable puffery. The Plaintiffs considered "most notable" the following conclusion:

MOO at 1224 n. 43. Here again, rather than setting forth "[g]rounds warranting a motion to reconsider," such as "(1) an intervening change in the controlling law, (2) new evidence previously unavailable, [or] (3) the need to correct clear error or prevent manifest injustice," Servants of Paraclete v. Does, 204 F.3d at 1012, the Plaintiffs state only that they disagree with the Court conclusion. See Memorandum at 26 ("In making the above referenced statement, Defendants were not merely setting forth an aspirational goal; rather, this statement constituted a hard, affirmative representation that TMI's focus on high-quality assets created liquidity by giving the Company access to financing during market downturns."). A motion for reconsideration is an "inappropriate vehicle[ ] to reargue an issue previously addressed by the court." Servants of Paraclete v. Does, 204 F.3d at 1012. The Court therefore denies the Plaintiffs request that it reconsider its conclusion that certain statements were in essence puffery.

IV. THE COURT WILL RECONSIDER DISMISSING THE PLAINTIFFS' SECTION 20(A) CLAIM AGAINST THORNBURG AND RESERVING JUDGMENT ON THE PLAINTIFFS' SECTION 20(A) CLAIM AGAINST GOLDSTONE, SIMMONS, AND DECOFF.

The Plaintiffs argue that the Court should reconsider portions of its order addressing claims asserted under Section 20(a) of the Exchange Act against the Individual Defendants. The Plaintiffs request that the Court: (i) "reconsider its failure to address the affirmative duty imposed on Defendants Mr. Thornburg and Badal to disclose material, nonpublic information prior to selling $900 million in Thornburg securities," Memorandum at 27, (ii) "reconsider its dismissal of the Section 20(a) Claims asserted against Defendants Mr. Thornburg and Badal," Memorandum at 28; and (iii) reconsider reserving its "decision on the Section 20(a) claims asserted against Defendants Goldstone, Simmons, and Decoff," Memorandum at 28. The Court reconsiders the Individual Defendants' disclosure duties, but concludes that Item 303 and the abstain-or-disclose rule provide no basis for it to change its decision. The Court reconsiders reserving ruling on Goldstone, Simmons, and Decoff, dismissing the Plaintiffs' Section 20(a) claims against Decoff, but not against Goldstone and Simmons. The Court also grants the Plaintiffs leave to file their SAC, because it sets forth allegations against Thornburg alleging he had control of Goldstone when Goldstone made actionable statements.

A. THE COURT WILL RECONSIDER THE AFFIRMATIVE DUTY IMPOSED ON THORNBURG AND BADAL TO DISCLOSE MATERIAL, NONPUBLIC INFORMATION BEFORE SELLING $900 MILLION IN THORNBURG SECURITIES, BUT WILL NOT CHANGE ITS DECISION TO DISMISS THE PLAINTIFFS' RULE 10b-5 CLAIMS AGAINST THEM.

The Plaintiffs contend that the Court should reconsider its failure to address the affirmative duty imposed on Thornburg and Badal to disclose material, nonpublic information before selling $900 million in Thornburg securities when it dismissed the Plaintiffs' § 10(b) and Rule 10b-5 claims against them. The Plaintiffs assert:

Memorandum at 26-27. While the Plaintiffs do not specify which of the allegations in their 172-page SAC "address[ ] the foregoing," the Plaintiffs apparently incorporate the disclosure argument that they waged against the Underwriter Defendants against Thornburg and Badal. Specifically, the Plaintiffs appear to assert that Thornburg and Badal were obligated to disclose: (i) TMI's increased reliance on RPA financing; (ii) TMI's $2.9 billion dollar portfolio of purchased MBS backed by Alt-A mortgages, which was used as collateral to secure TMI's RPAs; and (iii) the existence of cross-default provisions in its RPA contracts. For the reasons set forth in Section I.C, supra, where the Court rejected these arguments with regard to the Underwriter Defendants, the Court concludes that TMI fulfilled its disclosure obligations regarding these matters to the extent required, and Thornburg and Badal did not violate their disclosure obligations.

Moreover, in the Amended MOO, the Court also dismissed the Plaintiffs' § 10(b) claims against Thornburg and Badal in part because "[t]he Plaintiffs ha[d] successfully pled a strong inference of scienter as to Goldstone, but not as to any other Individual Defendant." Amended MOO at 1210. Section 78u-4(b)(2) of Title 15 of the United States Code requires that a plaintiff must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 78u-4(b)(2)(emphasis added). The Court held in its Amended MOO:

Amended MOO at 1194-95, 1201-02. Regarding Thornburg, the Court noted that the Plaintiffs alleged that

Amended MOO at 1200-01 (quoting CCAC ¶ 58, at 17). The Court considered the Plaintiffs' contention that Thornburg was motivated to commit securities fraud by the prospect of ever-greater compensation, the looming threat of bankruptcy, and the desire to raise capital through public securities offering, and concluded that "the alleged motives, and facts underlying them, standing alone, do not establish a strong inference of scienter," but that "[t]he allegations nudge the ball, however, further toward the Plaintiffs' goal with respect to Thornburg." Amended MOO at 1202. After holding that the Plaintiffs had sufficiently alleged scienter as to GoldStone, the Court held that the Plaintiffs had failed to allege scienter for Thornburg and the other Individual Defendants:

Amended MOO at 1212-13. The Plaintiffs do not appear to contend that they have added allegations addressing Thornburg's and Badal's scienter, and the Plaintiffs have not cured this deficiency in the SAC. Thus, the Court denies the Plaintiffs request that it alter its decision dismissing their Rule 10b-5 claims against Thornburg and Badal, because the Plaintiffs have not set forth a disclosure duty that would undermine the Court's decision, and the Plaintiffs have not cured the deficiencies in showing scienter for these Defendants.

B. THE COURT WILL RECONSIDER ITS RESERVATION OF A DECISION ON THE SECTION 20(A) CLAIMS ASSERTED AGAINST GOLDSTONE, SIMMONS, AND DECOFF.

In its Amended MOO, the Court stated:

Amended MOO at 1216. The Plaintiffs assert that the bankruptcy stay does not prevent the Court from deciding their Section 20(a) claims against Goldstone, Simmons, and Decoff. While Goldstone and Simmons oppose the Court reconsidering its decision, neither they nor Decoff dispute the Plaintiffs' assertion that the bankruptcy stay does not require the Court to reserve judgment. See Badal, Decoff, Lopez, and Sherman's Response at 18 ("Defendant Decoff takes no position on whether the Court should decide to proceed to rule on this issue. However, to the extent the Court reconsiders this part of its January 27, 2010 Opinion, Decoff requests that the Court dismiss Plaintiffs' Section 20(a) claim against him...."); Goldstone and Simmons Response at 25 ("The Court decided earlier as a matter of prudential case management that it did not need to address the control person claims now.").

The Court agrees that the bankruptcy stay does not require it to reserve judgment on the Plaintiff's Section 20(a) claims against Goldstone, Simmons, and Decoff. To state a claim under Section 20(a) of the Exchange Act, a plaintiff must establish a primary violation of the federal securities laws and that a defendant exerted control over the primary violator. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1107. If determining Section 20(a) liability against the Individual Defendants required the Court to decide liability against TMI, the Court would have to reserve judgment during the pendency of the bankruptcy proceedings. See 11 U.S.C. § 362(a) ("[A] petition filed under section 301 [voluntary petition] ... of this title ... operates as a stay ... of ... the... continuation ... of a judicial ... proceeding against the debtor that was ... commenced before the commencement of the case under this title...."). Because "the liability of the primary violator is simply an element of proof of a section 20(a) claim, ... liability need not be actually visited upon the primary violator before a controlling person may be held liable for the primary violator's wrong." In re CitiSource, Inc. Sec. Litig., 694 F.Supp. 1069, 1077 (S.D.N.Y.1988). See Mason v. Okla. Turnpike Auth., 115 F.3d 1442, 1450 (10th Cir.1997)("[T]he rule followed by this circuit and the general rule in other circuits is that the stay provision does not extend to solvent codefendants of the debtor.")(quoting Okla. Federated Gold & Numismatics, Inc. v. Blodgett, 24 F.3d 136, 141 (10th Cir.1994)); Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324, 1330 (10th Cir.1984)("The language of [11 U.S.C. § 362] extends stay proceedings only to actions `against the debtor.' There is nothing in the statute which purports to extend the stay to causes of action against solvent co-defendants of the debtor."); In re Colonial BancGroup, Inc. Secs. Litig., Civ. No. 2:09cv104-MHT, 2010 WL 119290, *2-4 (M.D.Ala. Jan. 7, 2010)(refusing to stay 20(a) claims directors and officers because of bankruptcy stay). Thus, the viability the Plaintiffs' Section 20(a) claim against the Individual Defendants does not require the Court to hold TMI liable, and courts frequently allow Section 20(a) claims to proceed against individual defendants even where the corporation has filed for bankruptcy. See In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 285-86 (3d Cir.2006)(finding company officers liable under Section 20(a) notwithstanding automatic stay on proceedings against bankrupt entity who was not named as a defendant); Howard v. Everex Sys., Inc., 228 F.3d 1057, 1059-60 (9th Cir.2000)(reviewing Section 20(a) claims against "Everex's CEO and Chairman of the Board" and its director after "Everex filed for bankruptcy and all actions against it were automatically stayed"); In re Able Labs. Sec. Litig., No. 05-cv-2681 (JAG), 2008 WL 1967509, at *28-29 (D.N.J. Mar. 24, 2008)(finding company officers liable under Section 20(a) notwithstanding automatic stay on proceedings against bankrupt entity who was not named as a defendant); Schleicher v. Wendt, No. 02-cv-1332, 2005 WL 1656871, at *5-6 (S.D.Ind. July 14, 2005)(rejecting a defendant's argument that, because the defendant company "was discharged in bankruptcy from any potential liability under the Exchange Act ..., plaintiffs cannot state a claim against them under § 20(a)," because the company "has not been found `not liable' for securities fraud. Also, it would be inconsistent with the broad remedial purposes of the securities laws to permit senior executives of a bankrupt corporation—whose actions allegedly contributed to the bankruptcy—to avoid liability by relying on the corporation's bankruptcy"). The Court will therefore reconsider its decision to reserve judgment against the Plaintiff's Section 20(a) claims against Goldstone, Simmons, and Decoff. See Servants of Paraclete v. Does, 204 F.3d at 1012 ("Thus, a motion for reconsideration is appropriate where the court has misapprehended the facts, a party's position, or the controlling law." (citation omitted)).

The Court previously held the Plaintiffs adequately alleged Goldstone made actionable statements and that "Goldstone, Simmons, and Decoff are control persons for the purpose of establishing Section 20(a) liability." Amended MOO at 1217. The Plaintiffs assert that, because "corporate entities are liable for materially false and misleading statements made by their highest-ranking executives," and "because TMI as an entity is liable as a matter of law for Defendant Goldstone's actionable statements, the Individual Defendants are also liable for these statements as control persons under Section 20(a)." Memorandum at 28. The Defendants respond that the Plaintiffs rely on a double-derivative liability theory that is without support in the law. The Defendants further respond that the Plaintiffs raise no new factual allegations leading to an inference that the Individual Defendants could be derivatively liable for Goldstone's alleged misstatements.

The Court agrees that Section 20(a) does not support a double derivative theory of liability to the extent that the Plaintiffs contend that all high ranking managers are liable for all Section 10b-5 violations, regardless whether they had control of the primary violators. Rather, to establish Section 20(a) liability, the Plaintiffs must establish that a Defendant had control over Goldstone. To establish a defendant's liability as a controlling person, a plaintiff must prove two things: (i) a primary violation of the securities laws, and (ii) that the defendant had "control" over the primary violator. Adams v. Kinder-Morgan, Inc., 340 F.3d at 1107. Section 20(a) of the Exchange Act states:

15 U.S.C. § 78t(a)(emphasis added). Thus, while "[t]he Tenth Circuit [has] observed that § 20(a) `has been interpreted as requiring only some indirect means of discipline or influence short of actual direction to hold a controlling person liable,'" Lane v. Page, 649 F.Supp.2d at 1306 (quoting Richardson v. MacArthur, 451 F.2d at 42), it has not held that all officers are liable for all violations that may be imputed to a company through agency theory, see Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108; rather, the Tenth Circuit requires a plaintiff to specify facts that "indicate that the defendants had `possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise,'" Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (quoting Maher v. Durango Metals, Inc., 144 F.3d at 1306). See 17 C.F.R. § 230.405 ("The term control (including the terms controlling, controlled by and under common control with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.").

In Adams v. Kinder-Morgan, Inc., the Tenth Circuit addressed whether certain individuals involved in Kinder-Morgan, Inc. qualified as control persons for the purposes of Section 20(a) liability. First, the Tenth Circuit held that the directors were not, ipso facto, control persons.

Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (citing Dennis v. Gen. Imaging, Inc., 918 F.2d at 509-10; Burgess v. Premier Corp., 727 F.2d at 832; Cameron v. Outdoor Resorts of Am., Inc., 608 F.2d at 195). On the other hand, the Tenth Circuit held that being a significant executive within the corporation, with ultimate management authority, is a control person:

Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (quoting Maher v. Durango Metals, Inc., 144 F.3d at 1305; citing In re Ribozyme Pharms., Inc. Sec. Litig., 119 F.Supp.2d at 1167). A high-ranking position within the corporation, however, standing alone, is unlikely to satisfy the "control" element of a control-person claim, unless the circumstance of the defendant's position and the nature of the underlying violation would lead to an inference that the person had control. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1109 (holding that the CFO of Kinder-Morgan, purely based on his position as CFO, was a control person where the securities-fraud violations related specifically to official reports on the company's financial performance). Importantly, it is not necessary that the control person actively participate in the alleged fraudulent activity. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108.29

With regards to deciding whether the Plaintiffs adequately pled a claim under Section 20(a), the Court first considered whether the Plaintiffs alleged a primary violation. In its Amended MOO, the Court dismissed the Plaintiffs' primary § 10(b) claims against all Defendants but Goldstone for two reasons: (i) the Plaintiffs failed to establish an inference of scienter against Defendants other than Goldstone; and (ii) the Plaintiffs sufficiently alleged only three material misstatements or omissions — none of which were attributable to any Defendant other than Goldstone.30 See Amended MOO at 1216 ("Because the Plaintiffs properly allege material statements and omissions only as to Goldstone, the Court will dismiss the Plaintiffs' Section 10(b) claims against the remaining Defendants."). Regarding the three material misstatements or omissions, the Court stated:

Amended MOO at 1214-15.

Having concluded that only Goldstone's and the March 3, 2008 Form 8's statements are actionable, the Court turned to the question whether the other Individual Defendants were derivatively liable under Section 20(a).

Amended MOO at 1216. The Court noted that "Goldstone, Simmons, and Decoff are control persons for the purpose of establishing Section 20(a) liability." Amended MOO at 1217. The Court stated:

Amended MOO at 1217-18.

1. The Court Will Not Dismiss the Plaintiffs' Section 20(a) Claims Against Goldstone and Simmons.

Goldstone and Simmons do not contest the Court's analysis of their Section 20(a) liability in its Amended MOO. Because the Plaintiffs have alleged that Goldstone was the CEO over and signer of the March 3, 2008 Form 8-K, under the Tenth Circuit's analysis in Adams v. Kinder-Morgan, Inc., the Plaintiffs have set forth adequate allegations to survive a motion to dismiss. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1109 (holding that the CFO of Kinder-Morgan, purely based on his position as CFO, was a control person where the securities-fraud violations related specifically to official reports on the company's financial performance). Similarly, the Plaintiffs' Section 20(a) claim against Simmons survives a rule 12(b)(6) challenge. Simmons was the Chief Financial Officer of TMI when the March 3, 2008 Form 8-K was filed, and the Tenth Circuit has held that a CFO is liable under Section 20(a) for securities-fraud violations based on statements in official reports on the company's financial performance. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1109. The Court therefore reconsiders its decision to reserve ruling whether to dismiss the Section 20(a) claims against Goldstone and Simmons, and denies the claims.

2. The Court Will Dismiss the Plaintiffs' Section 20(a) Claims Against Decoff.

Decoff contends that the Court should dismiss the Section 20(a) claim against him. The Plaintiffs' surviving Section 10(b) claims are based on Goldstone's alleged statements about Alt-A assets and TMI's alleged misrepresentations in its March 3, 2008 Form 8-K about the cross-default provisions. The Plaintiffs' allegations in the SAC do not plausibly suggest that Decoff had control over Goldstone or over the content of TMI's Form 8-K dated March 3, 2008. On the first score, in its Amended MOO, the Court stated:

See Amended MOO at 1217 n. 37. While the Plaintiffs assert that "Decoff exerted day-to-day control over TMI's operations at the time of the alleged misstatements," Memorandum 8, the Plaintiffs again fail to allege any facts in the SAC that Decoff controlled Goldstone on June 6, 2007 and July 20, 2007, see SAC ¶¶ 99-111, at 30-36. The Plaintiffs' allegations do not make plausible that Decoff, "as Director, Chief Lending Officer and Executive Vice President," SAC ¶ 108, at 35, would have "possession, direct or indirect, of the power to direct or cause the direction of" Goldstone, 15 U.S.C. § 78t(a), who as COO, was Decoff's supervisor, if even just through "indirect means of discipline or influence short of actual direction,'" Lane v. Page, 649 F.Supp.2d at 1306 (quoting Richardson v. MacArthur, 451 F.2d at 4). Beyond the conclusory, vague, and threadbare group allegations that the Court has rejected as inadequate to establish Section 20(a) liability, see SAC ¶ 69, at 21 ("[E]ach of the Individual Defendants had the opportunity and ability to influence the content of TMI's public statements and SEC filings, including statements made in conjunction with the Primary Violations."), the Plaintiffs do not allege that Decoff had any involvement in the June 6, 2007 North America REIT's Investor Forum or the July 20, 2007 earnings conference at which Goldstone allegedly made the actionable statements, cf. SAC ¶ 95, at 30 ("Defendant Simmons, side-by-side with Defendant Goldstone, participated and presented both the June 6, 2008 NAREIT Investor Forum presentation and the July 20, 2007 TMI second quarter earnings conference call, during which false and misleading statements were made to investors.").

The Plaintiffs also fail to allege that Decoff had control over the statements in the March 3, 2008 Form 8-K. Decoff and Badal argue that, as officers in TMI's lending operations, they had no control over TMI's financing operations, or the financing operations' disclosures in TMI's March 3, 2008 Form 8-K. Decoff and Badal assert that,

Badal, Decoff, Lopez, and Sherman's Response at 15-16 (emphasis in original). The Plaintiffs do not contest that TMI's lending and operations are distinct, or that they portrayed them as such in the CCAC. Instead, the Plaintiffs reply that Decoff and Badal cannot overcome their allegation in the SAC that the "Chief Lending Officer had specific authority over the entirety of TMI's mortgage loan portfolio, and had the opportunity and ability to correct misstatements and omissions regarding TMI's mortgage-related assets." Reply at 26.

The Court agrees that the Plaintiffs' allegations do not establish that Decoff and Badal,31 as officers in TMI's loan operations, controlled misstatements about its financing operations. See New Jersey v. Sprint Corp., 314 F.Supp.2d 1119, 1144 (D.Kan.2004)(holding that chief financial officer could not be imputed with control-person liability where the alleged misstatements "made in the SEC filings ... had nothing to do with financial reporting"). Cf. Adams v. Kinder-Morgan, Inc., 340 F.3d at 1109 ("As Kinder-Morgan's chief financial officer, it is reasonable to infer that McKenzie had at least indirect control over the KM's financial reporting." (emphases added)). In New Jersey v. Sprint Corp., the United States District Court for the District of Kansas addressed whether various officers and directors had control over alleged misstatements in Sprint's SEC filings:

314 F.Supp.2d at 1143-44 (emphasis added). The same reasoning defeats the Plaintiffs' Section 20(a) claims against Badal and Decoff, because a loan officer is not a control person over financing operations, which the Plaintiffs do not dispute is a distinct operation.

The Court does not see how Plaintiffs' allegation that the "Chief Lending Officer had specific authority over the entirety of TMI's mortgage loan portfolio, and had the opportunity and ability to correct misstatements and omissions regarding TMI's mortgage-related assets" save their Section 20(a) claim against Decoff. Reply at 26. The actionable misrepresentation in TMI's public disclosure in its March 3, 2008 Form 8-K states that, "[t]o the extent that any other reverse repurchase agreement contains a cross-default provision, the related lender, which may be an underwriter or its affiliate, could declare an event of default at any time." This statement involves the contractual provisions of TMI's RPA contracts. While the RPAs were collateralized with ARMs, the Court does not believe so attenuated a connection between TMI's loan operations and it financing operations plausibly establishes that a Chief Lending Officer has control over financing operations disclosures about TMI's RPA contracts. The Plaintiffs thus fail to allege with sufficient factual detail that Decoff controlled the financing operations' disclosures in the March 3, 2008 Form 8-K. Because the Plaintiffs fail to sufficiently allege that Decoff controlled Goldstone or financing operations' disclosures in the March 3, 2008 Form 8-K, the Court dismisses the Plaintiffs' Section 20(a) claim against him.

C. THE COURT WILL GRANT THE PLAINTIFFS LEAVE TO FILE THEIR SAC, BECAUSE IT ADEQUATELY ALLEGES A SECTION 20(A) CLAIM AGAINST THORNBURG, BUT THE PLAINTIFFS DO NOT ADEQUATELY ALLEGE A SECTION 20(a) CLAIM AGAINST BADAL.

Memorandum at 28. The Court held in its Amended MOO that the allegations in the CCAC failed to establish control person liability against Thornburg and Badal or that either of them had control over Goldstone:

Amended MOO at 1216-19 & n. 37.

The Plaintiffs contend that they have added sufficient allegations of control to establish control person liability against Thornburg and Badal. See Memorandum at 28. The Plaintiffs contend that, "because Defendants Mr. Thornburg, CEO (see SAC ¶¶ 72-83), and Badal, Chief Lending Officer and Executive Vice President (see SAC ¶¶ 99-105), were control persons of TMI at the time Defendant Goldstone's actionable statements were made, a Section 20(a) claim against each is sufficiently established." Memorandum at 30.32 The Court concludes that the Plaintiffs have set forth allegations in the SAC plausibly establishing that Thornburg controlled Goldstone, and accordingly grant the Plaintiffs leave to file their SAC. The Plaintiffs, however, have not pled allegations establishing Badal had control over any primary violations, so it will not alter its decision to dismiss the Plaintiffs' claims against him.

1. The Plaintiffs Have Adequately Alleged That Thornburg Was a Control Person.

The Plaintiffs' surviving Section 10(b) claims are based on Goldstone's alleged statements about Alt-A assets and TMI's alleged misrepresentations about the cross-default provisions in its March 3, 2008 Form 8-K. In response to the Court's holding that the Plaintiffs had failed to plead Section 20(a) liability against Thornburg, the Plaintiffs attempted to add the allegations to the SAC that Thornburg was responsible for the statements in TMI's filings and that he had control over Goldstone when Goldstone allegedly made his actionable statements. They allege in relevant part:

SAC ¶¶ 72, 78-83, at 23-25.

The Plaintiffs thus allege that Thornburg was TMI's CEO and "Goldstone's direct superior" in June and July 2007, when Goldstone allegedly made material misstatements that the Court has found to be actionable under the Exchange Act. SAC ¶ 78, at 23. These allegations are sufficient to establish Section 20(a) liability for the purposes of withstanding a motion to dismiss.

Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (quoting Maher v. Durango Metals, Inc., 144 F.3d at 1305; citing In re Ribozyme Pharms., Inc. Sec. Litig., 119 F.Supp.2d at 1167). See First Interstate Bank v. Pring, 969 F.2d at 898 (stating that allegations that a defendant had the ability to exert control over the circumstances of the primary violation, i.e., indirect control, are sufficient to state a claim under Section 20(a)); New Jersey v. Sprint Corp., 314 F.Supp.2d at 1143 ("Clearly, [a CEO] would not be entitled to dismissal of the control person liability claims."). The Court concludes that the allegations in the Plaintiffs' SAC establish a Section 20(a) claims against Thornburg, and the Court grants the Plaintiffs leave to file their SAC.

2. The Plaintiffs Have Not Adequately Alleged That Badal Was a Control Person.

The Plaintiffs also attempt to add allegations to the SAC that Badal was responsible for the statements in TMI's filings and that he had direct managerial authority over TMI and Goldstone. They allege in relevant part:

SAC ¶¶ 99-105, at 30-34.

The Plaintiffs' additional allegations in the SAC do not plausibly suggest that Badal had control over Goldstone or over the content of TMI's March 3, 2008 Form 8-K. First, as to Goldstone, while the Plaintiffs assert that the SAC contains new facts alleging that "Badal . . . exerted day-to-day control over TMI's operations at the time of the alleged misstatements," Memorandum at 8, the Plaintiffs fail to allege any facts in the SAC that Badal controlled Goldstone at the time of the alleged misstatements on June 6, 2007 and July 20, 2007. See SAC ¶¶ 99-111, at 30-36. While the Plaintiffs allege that Badal could "influence the direction and operations of TMI, including the decision, among other things, to originate risky Alt-A loans," SAC ¶ 99, at 31, that he had "primary responsibility" and "specific authority over the entirety of TMI's mortgage loan portfolio," SAC ¶ 101, 103 at 31, 33, the conclusion does not plausibly follow that he had direct or indirect control over Goldstone, who, as COO, was his superior. Beyond the conclusory, vague, and threadbare group allegations the Court has rejected as inadequate to establish Section 20(a) liability, see SAC ¶ 69, at 21 ("[E]ach of the Individual Defendants had the opportunity and ability to influence the content of TMI's public statements and SEC filings, including statements made in conjunction with the Primary Violations."), the Plaintiffs do not allege that Badal had any involvement in the June 6, 2007 North America REIT's Investor Forum or the July 20, 2007 earnings conference at which Goldstone allegedly made the actionable statements. Cf. SAC ¶ 95, at 30 ("Defendant Simmons, side-by-side with Defendant Goldstone, participated and presented both the June 6, 2008 NAREIT Investor Forum presentation and the July 20, 2007 TMI second quarter earnings conference call, during which false and misleading statements were made to investors.").

Moreover, the actionable statements in TMI's March 3, 2008 Form 8-K were published after Badal retired. The Court held in it Amended MOO that, "at the time of the only material misleading representation by TMI, Badal was retired and no longer Chief Lending Officer of TMI." Amended MOO at 1217. See SAC ¶ 63, at 20 ("Defendant Joseph H. Badal (`Badal') has served as a Director, Chief Lending Officer and Executive Vice President of the Company throughout the Class Period until his retirement on December 31, 2007."). The Plaintiffs' new allegations do not make plausible that Badal, "as Director, Chief Lending Officer and Senior Executive Vice President," would have "possession, direct or indirect, of the power to direct or cause the direction of the management and policies of" publication of financial information after his retirement, 15 U.S.C. § 78t(a), even through "indirect means of discipline or influence short of actual direction,'" Lane v. Page, 649 F.Supp.2d at 1306 (quoting Richardson v. MacArthur, 451 F.2d at 42). The Plaintiffs' allegation that Badal was a director after he retired does not save their Section 20(a) claim, because an allegation that a defendant is a director, without more, does not establish control person liability. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 ("The assertion that a person was a member of a corporation's board of directors, without any allegation that the person individually exerted control or influence over the day-to-day operations of the company, does not suffice to support an allegation that the person is a control person within the meaning of the Exchange Act." (citing Dennis v. Gen. Imaging, Inc., 918 F.2d at 509-10; Burgess v. Premier Corp., 727 F.2d at 832; Cameron v. Outdoor Resorts of Am., Inc., 608 F.2d at 195)). Moreover, as discussed with regard to Decoff in Section IV.B.2, supra, the Plaintiffs have not pled allegations plausibly establishing that TMI's lending officers had control over its financing operations' disclosures about RPA provisions in TMI's March 3, 2008 Form 8-K. See New Jersey v. Sprint Corp., 314 F.Supp.2d at 1144 (holding that chief financial officer could not be imputed with control-person liability where the alleged misstatements "made in the SEC filings ... had nothing to do with financial reporting"). Cf. Adams v. Kinder-Morgan, Inc., 340 F.3d at 1109 ("As Kinder-Morgan's chief financial officer, it is reasonable to infer that McKenzie had at least indirect control over the KM's financial reporting." (emphases added)). The Court therefore will not change its decision to dismiss the Plaintiffs' Section 20(a) claims against Badal.

IT IS ORDERED that Plaintiff's Omnibus Motion of (i) Leave to Amend the Consolidated Class Auction Complaint and (ii) For Reconsideration of the Court's January 27, 2010 Memorandum Opinion and Orders Granting in Part and Denying in Part Defendant's Motions to Dismiss the Consolidated Amended Complaint, filed July 9, 2010 (Doc. 309) is granted in part and denied in part. The Court orders that: (i) the Court will reconsider the Defendants' disclosure obligations under the abstain-or-disclose doctrine and Item 303 of Regulation S-K, 17 C.F.R. § 229.303, but the Defendants' disclosure duties thereunder do not alter the Court's holdings; (ii) the Court will not change its decision that TMI's 2007 Form 10-K was not actionable, because the Plaintiffs present no new law or facts to support their request for reconsideration on this matter; (iii) the Court will not change its decision that certain of the Defendants' statement were inactionable puffery, because the Plaintiffs again present no new law or facts to support their request for reconsideration on this matter; (iv) the Court will not change its decision to dismiss the Plaintiffs' Section 10(b) claims against Defendants Garrett Thornburg and Joseph H. Badal, because the disclosure duties under the abstain-or-disclose rule and Item 303 do not alter the Court's analysis; (v) the Court will reconsider reserving ruling on the dismissal of the Plaintiffs' Section 20(a) claims against Defendants Larry A. Goldstone, Clarence D. Simmons, and Paul G. Decoff, dismissing the Plaintiffs' claims against Decoff, but not dismissing the Plaintiffs' claims against Goldstone and Simmons; and (vi) the Court grants the Plaintiffs leave to file their Second Amended Complaint, see Doc. 309-1, because the SAC cures deficiencies in the Plaintiffs' allegations establishing Section 20(a) liability against Thornburg.