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In re Synchronoss Securities Litigation

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY


April 6, 2010

IN RE SYNCHRONOSS SECURITIES LITIGATION

The opinion of the court was delivered by: Garrett E. Brown, Jr., Chief Judge

OPINION

TABLE OF CONTENTS

I. Introduction

II. Background

III. Parties' Contentions

A. Dismissal Motion

1. Plaintiffs' Position

a. Overall Factual Assertions

b. Four Lines of Plaintiffs' Allegations

i. Allegations Related to the iPhone 3G

ii. Allegations Related to "Unlocking"

c. Plaintiffs' Additional Contentions and Legal Claims

2. Defendants' Position

B. Strike Motion

IV. Discussion

A. Strike Motion

1. Evidentiary Aspects

2. Procedural Aspects

B. Dismissal Motion

1. Pleading Requirements

a. Rule 8 Pleadings

b. Pleading Under Rule 9 and the Reform Act

2. Substantive Law

a. Element Pled Pursuant to Rule 8: Materiality

b. Elements Pled Pursuant to Rule 9

i. Reliance

ii. Scienter

iii. Forward-looking Statements

iv. Omissions

c. Liability of Controlling Person

3. Claims Based on Defendants' Forward-Looking Statements

a. Future Projections Allegedly Related to the iPhone 3G

b. Future Projections Allegedly Related to "Unlocking"

i. "False Failure to Project" as a Cause of Action

ii. Insufficiency of Pleadings

iii. Substantive Insufficiency of the Claim

4. Claims Based on Defendants' Alleged Omissions

a. Lack of Duty to Disclose Ensuing from Waldis and Irving's Trades

b. Allegations as to Omissions and/or Duty to Correct or Update

i. Omissions as to the iPhone 3G

ii. Omissions as to the Change in Synchronoss' Revenue

C. Leave to Amend

V. Conclusion

I. INTRODUCTION

This matter is before the Court upon Defendants' motion ("Dismissal Motion"), see Docket Entry No. 24, seeking dismissal of Plaintiffs' Consolidated Class Action Complaint ("Complaint"). See Docket Entry No. 22. Plaintiffs filed their opposition to the Dismissal Motion ("Dismissal Opposition"), see Docket Entry No. 25, to which Defendants filed a reply ("Dismissal Reply"). See Docket Entry No. 30. The foregoing submissions appear to be intertwined with Plaintiffs' later filed motion ("Strike Motion") requesting the Court to strike certain Defendants' arguments raised in the Dismissal Motion. See Docket Entry No. 27. Defendants filed their opposition to the Strike Motion ("Strike Opposition"), see Docket Entry No. 31, to which Plaintiffs filed a reply ("Strike Reply"). See Docket Entry No. 32.

For the reasons detailed below, Plaintiffs' Strike Motion will be denied, without prejudice, as premature. Defendants' Dismissal Motion will be granted on grounds unrelated to Plaintiffs' Strike Motion, and the Consolidated Class Action Complaint will be dismissed. Such dismissal, however, will be without prejudice, and Plaintiffs will be granted leave to cure the deficiencies of their pleadings.

II. BACKGROUND

Plaintiffs brought this action on behalf of a putative class consisting of all persons and entities that purchased or otherwise acquired securities ( seemingly, common shares only) issued by Synchronoss during a slightly more than four month period, from February 4, 2008 to June 9, 2008, both dates inclusive ("Class Period"). See Compl. ¶ 2.

According to the Complaint, Defendant "Synchronoss [Technologies] is a Delaware corporation[,] with principal executive offices located at... Bridgewater, New Jersey*fn2.... As of August 27, 2008, [Synchronoss] had approximately 31.4 million shares outstanding that traded on the NASDAQ under the symbol 'SNCR.'" Compl. ¶12. While the technical endeavors in which Synchronoss is involved are complex and multiple, it can be said that Synchronoss is, generally, in the business of creating and licensing software used by other business entities, which are involved in providing wireless services; one of the functions that Synchronoss' software can perform is activation of wireless devices from remote locations, e.g., remote (meaning, online/off-site) activation of iPhones (mobile/cell phones produced by Apple Inc. ("Apple").*fn3 See id. ¶¶ 26-27.

Apple is a corporation that designs and manufactures consumer electronics and computer software; Apple's most well-known hardware products include Macintosh computers, the iPod, the iPhone, etc. Steven "Steve" Paul Jobs is the co-founder and chief executive officer of Apple.

The history of the iPhone began with a conclusion reached by Steve Jobs in 2003 that the high-tech future belonged to mobile phones that could also operate as devices enabling access to portable information. By that time, Jobs had Apple put its energies into the iPod, a portable media player, and the corresponding iTunes software, a digital media player application used for purchasing and downloading digital music and video files. In September 2006, Apple released a new version of iTunes that included references to a then-yet-unknown mobile phone which was announced four months later as the "iPhone"; the iPhone was actually introduced into the market on June 29, 2007.*fn4

The iPhone is an excellent example of what is commonly known as a "smartphone," meaning that it is a mobile telephone offering computer-like capabilities, i.e., it is an advanced cell phone (allowing such features as text messaging, visual voicemail, audio conferencing, call holding, call merging, caller ID, etc.) that also functions as a camera and a portable media player equivalent to a video iPod, allows the user a Wi-Fi connection with complete access to the Internet (including email, full web browsing, etc.) and, in addition, performs many other functions.

When the original version of iPhone was introduced to the purchasing public in 2007, TIME Magazine named it the Invention of the Year. The second generation of the iPhone, popularly known as the "iPhone 3G," is an even more advanced device capable of receiving and processing data faster than the original iPhone; it also performs additional and more complex functions than the original iPhone and, in addition, ensures that the user -- even if (s)he is located in an area suffering from a poor cell phone connection -- could nonetheless access the transmission frequency securing due reception.*fn5

Apple tightly controls most aspects of the iPhone; for instance, the iPhone's operating system is designed to only run software that has an Apple-approved "cryptographic signature," i.e., the code protecting against alterations or corruptions.

All iPhones must -- theoretically -- be "activated," meaning that they have to be assigned a telephone number and carrier before the user could obtain assess to iPhone features. For the purposes of the United States market, all iPhones are "locked," in the sense that the creators of the iPhone tried (and keep aggressively trying) to ensure that the iPhone could be used only with one particular authorized carrier, namely, AT&T, which is Apple's partner network.*fn6

However, various "hackers," who are unwilling to switch from their carriers to AT&T either out of customer loyalty or because they are planning to use different service providers when traveling to Europe/ Asia (in order to avoid the roaming fees charged by AT&T on overseas calls), or because they simply dislike AT&T's subscription terms or AT&T as a business entity, found methods to "unlock" -- meaning, to "activate" -- their iPhones in order to use them with unauthorized carriers (that is, carriers other than the AT&T) after such "unlocking."*fn7 In sum, it can be said that "unlocking" is the process by which a cell phone (or any mobile device) is made compatible with telephone network(s) it was not specifically licensed to be used with.

Many owners of smartphones (including the owners of iPhones) are, however, not concerned with the issue -- or not concerned with only the issue -- of changing their service providers: rather, they want to gain control over the applications/software they can install on their mobile devices. Presumably, the reason is that many smartphone manufacturers "lock" the devices so that only their approved applications can be installed. Apple is no exception to that practice, and the iPhone can only install applications purchased from Apple's App Store (since the iPhone's operating system is designed to run only the software that has an Apple-approved cryptographic signature); therefore, if there is an application an owner of the iPhone wants to install that is not officially approved and offered by Apple, (s)he out of luck. However, similar to the "unlocking" restriction (relevant for the purposes of phone "activation"), this installment-of-software restriction could be overcome by "jailbreaking" the phone, that is, by replacing the iPhone's firmware with a slightly modified version that does not enforce the signature check.

While the goals and technical aspects of "unlocking" and "jailbreaking" are qualitatively different,*fn8 the financial implications of these processes are somewhat similar for the purposes of both Apple and AT&T. In the case of "unlocking," AT&T is prevented from collecting fees associated with its acting as a carrier of cell phone accounts of the iPhone owners, while in the case of "jailbreaking" -- Apple is prevented from collecting the fees associated with the iPhone owners' installment and/or usage of Apple's App Store software applications.*fn9 Consequently, beginning in September 2007, Apple has been releasing various technical updates and new firmware aimed at either relocking the "unlocked/jailbroken" iPhones or to "bricking" such devices (i.e., rendering these "hacked" devices inoperable).

It appears that Synchronoss was the entity which created the program allowing Apple/AT&T to offer their customers an opportunity to self-activate their new iPhones. In other words, in contrast with the traditional model necessarily requiring a customer to go through the process of in-store purchase-and-activation of his/her new iPhone, Synchronoss' program (adopted by Apple/AT&T) allowed the customer to choose between: (1) the in-store purchase-and-activation; and (2) an opportunity to (a) purchase an iPhone (either in-store or online); and then (b) self-activate this new iPhone from the comfort of the customer's own home via iTunes. Since the self-activation option permitted iPhone purchasers to physically take their yet-to-be-activated iPhones outside AT&T' stores, such option also provided these purchasers with a "window-of-opportunity" during which they could "hack" their new iPhones by "unlocking" their new devices. In light of the obvious financial losses caused by the practice of "unlocking" original iPhones, Apple/AT&T -- starting from release of Apple's iPhone 3G -- decided to part with the customer-convenient-but-profit-endangering model of self-activation and elected to permit only the old-but-financially-more-secure model of in-store purchase-and-activation. Consequently, Synchronoss' off-site/online self-activation program became of no use for the purposes of the iPhone 3G, causing the stream of compensation Synchronoss was receiving from Apple/AT&T for the use of its program to progressively dry up, since Synchronoss' program kept being used only for the purposes of off-site activations of the original iPhones that were (re-)entering the market.*fn10

III. PARTIES' CONTENTIONS

A. Dismissal Motion

1. Plaintiffs' Position

a. Overall Factual Assertions

For reasons not entirely clear, and -- seemingly -- without any correspondence to the remainder of Plaintiffs' allegations, the Complaint opens with Plaintiffs' contention that "Synchronoss' [self-activation program was designed] to prevent Apple iPhones from being activated with wireless phone carriers other than AT&T," Compl. ¶ 2 (emphasis supplied), even though it appears that the Synchronoss' program*fn11 was not designed to be a "lock" (or an anti-"hacking" device) of any kind and, indeed -- for the purposes of phone activation -- such "lock" was already imbedded in the iPhone by Apple itself, via its firmware intertwined with its GSM system (using the SIM cards tied to each iPhone's serial number). Accord Compl. ¶ 28 ("Synchronoss provided the software allowing U.S. purchasers of the iPhone to activate that device from their home computers for use on AT&T's network"). Thus, while -- as detailed infra -- the Court is obligated to take all Plaintiffs' factual allegations as true for the purposes of Defendants' Dismissal Motion, the Court presumes that this particular piece of information (i.e., the allegation seemingly suggesting that Synchronoss was hired, but failed, to protect the iPhone from "unlocking" or other forms of hacking) was included by Plaintiffs in the Complaint as a result of inadvertence.

The remainder of Plaintiffs allegations do not appear inherently self-contradicting. According to the Complaint, Synchronoss, in its report addressing the second quarter of 2007, "[a]nnounced a multi-year contract with AT&T to support the launch and ongoing operational support of the Apple iPhone." Id. ¶ 33. The utilization of ConvergenceNow by AT&T "allowed Synchronoss to profit every time an Apple iPhone was activated on the AT&T network."*fn12 Id. ¶¶ 2, 29. In 2007, Synchronoss' gross receipts from off-site iPhone activations via ConvergenceNow amounted to 32.38% of Synchronoss' gross revenue.*fn13 Id. ¶¶ 2, 31, 44 and 50. By the beginning of the Class Period, "Synchronoss continued to maintain that the iPhone was producing and would produce tremendous results for [Synchronoss,] and [Synchronoss'] financial condition was strong." Id. ¶ 4.

The Complaint further alleged that, because: (a) "[a]t the time the iPhone was released, it was unlike any other phone on the market[; and (b)] most consumer wireless contracts [were, as they typically] are[,] two years in length..., [some investors, Plaintiffs included, as well as some] technical journalists and [some] financial analysts[*fn14 somehow] believed that the number of iPhone sales would increase in coming years," and Synchronoss' income from off-site activations [of iPhones] would show an "astronomical growth."*fn15 Id. ¶¶ 32, 38. The aforesaid beliefs of these "journalists, financial analysts and investors" were, apparently, fueled in 2008 by the exact-content-unspecified rumors of unspecified origin, the gist of which was that the iPhone 3G would soon be released and, also, available for off-site self-activation, and, in addition, that Synchronoss would, also, handle these off-site activations of iPhones 3G. Plaintiffs maintain that this rumor-based three-step deducement had to be warranted because: (a) Synchronoss had widely publicized its 2007 "multi-year contract with AT&T to support the launch and ongoing operational support of the Apple iPhone," id. ¶ 2, 29, 33; and (b) Synchronoss was not discussing/projecting/publicizing the possibility that it might be excluded from off-site activations of future models of the iPhone, or that these future models of the iPhone (the iPhone 3G inclusive) could be, altogether, not offered by Apple/AT&T for off-site activation. See id. ¶¶ 32-34; Dismissal Opp., at 5-6 (asserting that Plaintiffs' deduction as to Synchronoss' upcoming off-site activation of the iPhone 3G was necessarily logical simply because "Defendants said nothing to the contrary").

b. Four Lines of Plaintiffs' Allegations

Plaintiffs assert that, on May 6, 2008,... [Synchronoss] announced that it had 'materially lowered' its [financial projections] for [the remainder of] 2008 due[,] in large part[,] to declining revenue associated with Apple's iPhone." Compl. ¶ 4. From this statement on, the Complaint, as well as the Dismissal Opposition, seems to run on the following four, rather distinct, tracks of allegations, although these allegations are at first heavily interwoven, if not plainly conflated, but then presented in a somewhat patchy fashion.

Specifically:

(a) some assertions seem to suggest that Defendants unduly concealed the known-to-them truth about the financial effect the practice of "unlocking" was taking on Synchronoss' revenue;

(b) another line of allegations, also related to the practice of "unlocking," does not address the issue of what Defendants omitted to disclose about the then-existing financial situation of Synchronoss; rather this line of allegations seems to imply that Defendants wrongly forecasted (or did not correct their prior forecast as to) Synchronoss' future revenue by not factoring in the potential negative impact which the practice of "unlocking" might take on Synchronoss' revenue in the months to come;

(c) the third line of assertions has nothing to do with the practice of "unlocking." Rather, these allegations seem to imply that Defendants' statements about Synchronoss' "multi-year" contract and, perhaps, the overall optimistic tone of Defendants' future projections, somehow misled the investors into believing that: (i) the iPhone 3G would necessarily be available for off-site/online activation; (ii) Synchronoss would necessarily be involved in such online self-activation and would, thus, derive revenue on a per-activation basis, as was the case with the original iPhone; and (iii) because the iPhone 3G would be a more advanced device in comparison with the original iPhone, it would necessarily be even more popular than the original iPhone, and that would necessarily result in Syncronoss' receipt of even more lucrative profit from off-site activation of the iPhone 3G. See generally, Compl.; and

(d) the final line of allegations seems to suggest that, even prior to June 9, 2008, Defendants knew, for a fact, that Apple/AT&T decided not to involve Synchronoss in the process of activating iPhones 3G, but Defendants omitted to disclose this fact to the investors.*fn16

In addition to these four lines of allegations, Plaintiffs state a line of derivative claims against Waldis and Irving. See note 29, infra. i. Allegations Related to the iPhone 3G Plaintiffs assert that when, on May 6, 2008, Synchronoss "announced that it had 'materially lowered' its [financial projections] for [the remainder of] 2008 due[,] in large part[,] to declining revenue associated with Apple's iPhone," Synchronoss failed to disclose the allegedly already-known-to-Defendants fact that Synchronoss' services would not be utilized for the purposes of the iPhone 3G. Id. ¶¶ 5-6.

The information that Synchronoss' services would not be utilized with regard to the iPhone 3G was publicized by AT&T on June 9, 2008. Id. According to the Complaint, on the next day, that is, on "June 10, 2008, [Synchronoss] confirmed [AT&T's] announcement and admitted that [its non-retention by Apple/AT&T for the purposes of the iPhone 3G] was a reason" for Syncronoss' release of lower financial projections on May 6, 2008.*fn17 Id. ¶ 6 (emphasis supplied). Although the Complaint does not inform the Court about the actual "admission" language by Defendants, Plaintiffs seem to deduce the fact of such admission from the language of Synchronoss' 8-K Report filed with the SEC June 10, 2008. That Report read, in relevant part, as follows: on June 9, 2008, AT&T announced the expansion of its relationship with Apple relative to the much anticipated launch of the 3G Apple iPhone. Synchronoss will continue [its] relationship with AT&T as it relates to the activation and provisioning of Apple iPhones. However, Synchronoss will not participate in the on-site, retail store activations associated with the 3G iPhone, which was already taken into consideration when we provided our revised financial outlook on our first quarter 2008 financial results conference call.

Compl. ¶ 51 (emphasis supplied by Plaintiffs).

Plaintiffs seek to explain their allegations as follows: "By admitting that the revision downward of [Synchronoss'] full year 2008 [projections] was partially due to the fact that [Synchronoss] would not be involved with the activation of the 3G iPhone, Defendants also admitted that their [projections,] issued on February 4, 2008, [were] based upon the presumption that [Synchronoss] would be involved with the 3G, which they already knew was not going to occur." Compl. ¶ 52. However, this purported clarification offers more problems than solutions. First, it is not clear as to how one can possibly base his/her projection on a presumption (s)he has not actually presumed. At best, one could surmise that Plaintiffs seek to assert that: (a) Defendants knew that their services would not be utilized in activations of the iPhone 3G; but (b) Defendants' 2008 projections, nonetheless, factored in the receipts from off-site activations of the iPhone 3G.

However, this odd turn of phrase presents a minor concern. A far more substantial problem with Plaintiffs' deduction is that the 8-K Report quoted by Plaintiffs merely stated that "Synchronoss will not participate in the on-site, retail store activations associated with the 3G iPhone." Id. ¶ 51 (emphasis supplied). That statement is qualitatively different from Plaintiffs' leap of logic reading it as Synchronoss' admission of long-time knowledge that Synchronoss would not be involved in any activation (including off-site, online activation) of the iPhone 3G. Contrary to Plaintiffs' deduction, it seemed quite logical for Synchronoss to factor in its non-involvement in on-site, retail store activations:*fn18 indeed, Synchronoss' ConvergenceNow program was never designed for such use; rather, it was expressly created only for off-site/online activation.*fn19

In light of the foregoing, Plaintiffs' assertions (i.e., (a) that Defendants' 8-K Report of June 10, 2008, contained an "admission" that Defendants knew the iPhone 3G would not be available for off-site self-activation and, thus, would not utilize ConvergenceNow; and (b) that Synchronoss' publication of its multi-year contract with AT&T was effectively equal to an announcement that Synchronoss would service off-site activation of either all future models of the iPhone or, at the very least, of the iPhone 3G) appear to state not a fact but a factless self-serving conclusion.

Another set of allegations, seemingly related to the iPhone 3G, consists of the following four assertions:

a. [Synchronoss] invested a large amount of time [i.e., months] and work... preparing [its umbrella version of ConvergenceNow for the specific use with the original iPhone]. Compl. ¶ 28.

b. A former Manager of Information Technology at Synchronoss in Bethlehem, PA [employed by Synchronoss] until March 2008, who was personally involved with the task of purchasing over a million dollars worth of equipment for the development and launch of the 2G phone,*fn20 stated that it would be a matter of months versus weeks for Synchronoss to gear up for the launch of the 3G iPhone. Moreover, he stated that the Company laid off their most senior technical staff, including the Senior Windows Engineer and the Senior Network Engineer who would have been essential to working on the 3G iPhone in the months before it was launched. The Company's laying off of its senior technical staff essential that would have been essential [sic] to the 3G iPhone is a strong indication that Defendants knew at that time that Synchronoss would play no role in activating the 3G iPhone. Id. ¶ 47 (emphasis supplied).

c. A former Synchronoss Agent Supervisor in Bethlehem, PA from July 2007 through March 2008 stated that the Company terminated many people in February 2008. Id. ¶ 48.

d. According to a former Synchronoss software engineer employed by the Company until February 2008, the layoffs in February 2008 were of permanent employees. Id.

These four assertions seem to suggest, jointly, the following two sentiments: (1) since it took Synchronoss months to alter its umbrella version of ConvergenceNow for off-site activation of the original iPhone, it necessarily had to take Synchronoss at least a comparably lengthy period of time to re-alter its tailored-to-the-original-iPhone version of ConvergenceNow for off-site activation of the iPhone 3G; and (2) such re-alteration had to also be so technically complex that layoffs of certain permanently employed managers and senior engineers, and some other permanent staff, would automatically render the task of such re-alteration virtually insurmountable.

The problem with these assertions is two-fold. First, to a person lacking expertise in high-tech matters, as is the case with this Court, the argument appears plainly conclusory. Indeed, while the iPhone 3G is a more advanced technical device in comparison with the original iPhone, that fact, in and by itself, does not necessarily indicate that the computer program activating this advanced device electronically must be qualitatively different from the computer program activating the original iPhone and/or that the process of modification of the original computer program would be as complex as the process of creating that original program from scratch.*fn21 Second, even if the Court were to hypothesize that an expert computer programmer could verify Plaintiffs' conclusions sufficiently to meet the requirements of the Federal Rules of Evidence, this presumption cannot cure the deficiencies of Plaintiffs' pleadings since the above-quoted assertions -- being merely pled by Plaintiffs in the Complaint -- still cannot be qualified as facts: at best, they could be qualified as an inadmissible non-expert opinion. Consequently, the only pled fact the Court could gather from the four above-quoted assertions is that, in February of 2008, Synchronoss laid off an unspecified number of employees, some of which had senior positions and some of which were permanent staff.

ii. Allegations Related to "Unlocking"

As noted supra, Plaintiffs' Complaint suggests two lines of allegations related to "unlocking," namely: (1) allegations seemingly indicating Plaintiffs' position that Defendants concealed the known-to-them truth about the effect "unlocking" was taking on Synchronoss' revenue; and (2) assertions that Defendants issued false financial projections by not factoring in the possible negative effect the practice of "unlocking" was capable of causing to Synchronoss' future revenue.

Six events are described in the Complaint with respect to these"unlocking"-based challenges.

They are:

1. On February 4, 2008, Synchronoss held its fourth-quarter-of-2007 earnings call. See Compl. ¶ 56. Both Defendants Waldis and Irving made certain statements during the call. See id. Specifically:

a. Waldis stated: "We are extremely pleased with the continued high level performance that our ConvergenceNow [program] has delivered [for the purposes of] activation of the Apple iPhone." Id. Plaintiffs read this statement as an utterance intentionally disguising the effect the practice of "unlocking" had been causing -- or could cause -to Synchronoss' then-accrued and/or future revenue.*fn22 See Dismissal Opp., at 7.

b. Irving forecasted Synchronoss first-quarter-of-2008 revenue at $30 to 32 million, and full revenue for the year 2008 at $151 to $160 million.*fn23 See Compl. ¶ 58. Plaintiffs assert that these figures were provided by Defendants regardless of Defendants' knowledge that these projections would be unattainable because of the negative impact the practice of "unlocking" might have been destined to cause to Synchronoss' revenue.*fn24 See Dismissal Opp., at 7-8.

2. On the same day, that is, on February 4, 2008, Syncronoss also issued a press release in which, according to the Complaint: (a) "Irving stated that 'we are more optimistic about [Synchronoss'] long-term future than at any point in our history'"; while (b) "Waldis [stated] that 'Synchronoss is well positioned to benefit from multiple growth opportunities' and [that he] was 'optimistic about [Synchronoss'] ability to take advantage of those opportunities based on Synchronoss' unique ConvergenceNow.'" Compl. ¶ 55. Plaintiffs read both of these statements as Defendants' assertions that "unlocking" was not affecting -- and would not affect -- Synchronoss' accrued and future revenue.*fn25 See Dismissal Opp., at 8.

3. "On February 29, 2008, [Synchronoss] filed its [10-K] Report... with the SEC. [See Compl.] ¶ 59. The [Report], which was released two-thirds of the way through the first quarter of 2008, did not discuss the materially adverse effect" of unlocking (as to the accrued part of the first quarter of 2008), and did not offer new quarterly or yearly revenue projections factoring in the potential negative impact of "unlocking."*fn26 See Dismissal Opp., at 8.

4. "On May 6, 2008, Synchronoss issued a press release... reporting its results for the first quarter [of] 2008. In that press release, [Synchronoss] announced that it had materially lowered its growth expectations in 2008 due to reduced revenues associated with the iPhone. [In addition, Synchronoss] reported net revenue of $29.1 million for the first quarter of 2008, missing its projection of $30[] million [by $0.9 million, that is, by 3%]."*fn27 Compl. ¶ 63. Synchronoss also revised its projections for the entire 2008, lowering them from $151-$160 million to $115-120 million. Id. ¶ 63. Plaintiffs read this press release as Defendants' statement verifying that Defendants knew that the practice of "unlocking" was negatively affecting Synchronoss' revenue long before May 6, 2008. See Dismissal Opp., at 8-9.

5. On the same day, that is, on May 6, 2009, Defendants had another earnings call. During that call, Waldis, in response to an analyst's question "[A]re you basing your expectations for the year on a run-rate basis from where you are right now or with further degradation of activation rates from where you are now given the trending?" stated:

Well, we certainly think of -- as I said earlier, we definitely see ourselves at an at least 10 million annual run-rate exiting the year as it relates to the iPhone.... Obviously, getting the surprise in January and February, we looked at it and wanted to make sure that as far as forecasting going forward, that we accounted for it, maybe conservatively. If it ends up being better, that would be great. But... we'll at least end with a $10 million run-rate at the end of the year.

Compl. ¶ 66 (emphasis supplied by Plaintiffs); Dismissal Mot., Ex. 9. Same as with regard to Defendants' May 6, 2009, press release, Plaintiffs read Waldis' phrase "getting the surprise in January and February" as an indication that Defendants knew about the effect the practice of "unlocking" was taking on Synchronoss' revenue in January and February of 2008, and deduce from the foregoing that Defendants' projections stated during February 4, 2008 earnings call (and repeated in Synchronoss' February 4, 2008, press release), as well as Defendants' figures provided in the February 29, 2008, Report, were false due to Defendants' failure to take into account the negative effect of "unlocking." See Dismissal Opp., at 9.

6. Finally, Plaintiffs also make a reference to Synchronoss' press release of October 25, 2007. Plaintiffs point out that, during the above-discussed May 6, 2008, earnings call, Irving, in response to an analyst's question, "Can you confirm that you will continue processing iPhone transactions later in this year and that the guide down is strictly related to the number of phones being unlocked and the reduced pricing arrangement around that?" responded with, "I think the best way to answer that... is that I've tried to provide as much information as I could without violating any [non-disclosure agreements ("NDAs")] that [Synchronoss has] with [Apple and/or AT&T]." Compl. ¶ 67. Plaintiffs, however, note that Synchronoss' press release of October 25, 2007, did state the cumulative number of iPhones activated by that date via ConvergenceNow (which, Plaintiffs guess, might have been a violation of the very same NDAs to which Irving referred on May 6, 2008). See id. ¶ 37. Consequently, Plaintiffs compare Synchronoss' October 25, 2007, disclosure of the cumulative number of activated iPhones with the statement made by Irving during the May 6, 2008, earnings call and conclude as follows:

[A]fter the third quarter 2007 earnings announcement, Synchronoss changed its practice and stopped disclosing to investors how many iPhones it had activated in any period notwithstanding its prior practice of doing so. Indeed, despite the importance of the iPhone contract as a whole, Synchronoss did not separately disclose its revenue from that or any other contract. Rather, citing non-disclosure agreements with its customers, Synchronoss informed investors only of its total revenue from operations for each quarter. Therefore, at no point during the Class Period were investors able to determine for themselves the number of iPhones that were being activated versus those that were being unlocked.*fn28

Compl. ¶ 43; accord Dismissal Opp., at 7.

c. Plaintiffs' Additional Contentions and Legal Claims

Plaintiffs also assert that

[Waldis and Irving] were... motivated to engage in the fraudulent scheme in order... to sell their personally held Synchronoss common stock... at artificially inflated prices while they [knew that the practice of "unlocking" was taking a toll on Synchronoss' revenue]. The following chart sets forth the [stock sales] by [Waldis and Irving] during the [C]lass [P]eriod:

 [Waldis:][Irving:] [May 2008 --]6,000 [shares]...3,080 [shares] [April 2008 --]54,000 [shares]...6,160 [shares] [March 2008 --]12,000 [shares]...3,080 [shares] [February 2008 --]12,000 [shares]...1,100 [shares]  Total: 84,300 [shares]...13,420 [shares]

Compl. ¶ 83.

Basing their legal claims on these figures (and, obviously, on all other allegations discussed supra), Plaintiffs claim that Defendants' actions amounted to violations of Section 10(b) of the Exchange Act and of Rule 10b-5. See id. ¶¶ 98-109. Plaintiffs also claim that, in light of the foregoing, Waldis and Irving -- being top executive officers and, thus, in control of Synchronoss -- violated Section 20(a) of the Exchange Act. See id. ¶¶ 110-13.

Finally, Plaintiffs maintain as follows:

The statutory safe harbor provided for forward-looking statements... does not apply to any of the... statements [made by Defendants since] many of the[se]... statements... were not identified as "forward-looking statements" when made. [Moreover,] to the extent there were any forward-looking statements, there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. Alternatively,..., [D]efendants are liable for [their] false forward-looking statements because[,] at the time [these] statements [were] made, the... speaker[s] knew that [their] forward-looking statement[s were] false.... Id. ¶ 96.*fn29

2. Defendants' Position

Defendants maintain that Plaintiffs' claims should be dismissed on various grounds. See, generally, Dismissal Mot., Dismissal Reply. First, addressing Plaintiffs' claims related to Defendants' forward-looking statements, Defendants point out that these forward-looking statements were: (a) accompanied by sufficient cautionary language, which immunizes the speaker from liability regardless of the speaker's state of mind, see Dismissal Mot., at 14-20; Dismissal Reply, at 4-9; and (b) in any event, the statements at issue were made by Defendants without the requisite state of mind. See Dismissal Mot., at 20-34; Dismissal Reply, at 9-18. In addition, Defendants argue that Plaintiffs' other group of claims -- namely, the group of claims asserting that Defendants' statements were misleadingly incomplete -- should also be dismissed on the grounds of: (a) being insufficiently pled; and (b) allegedly existing Synchronoss' NDAs with Apple/AT&T that, Defendants believe, legally prevented Synchronoss from disclosure of certain information. See Dismissal Mot., at 34-43; Dismissal Reply, at 18-28. Finally, Defendants point out that Plaintiffs "fail[ed] to allege that any other statement made by Defendants was false, let alone knowingly false." See Dismissal Mot., at 43-45; Dismissal Reply, at 28-29. In light of the foregoing, Defendants conclude Synchronoss committed no violations of Section 10(b) and/or Rule 10b-5 and, consequently, Waldis and/or Inving's have no personal liability under Section 20(a). See Dismissal Mot., at 45; Dismissal Reply, at 29.

Defendants' submissions arrived accompanied by numerous exhibits and appendices, replicating a multitude of Synchronoss' filings made with the Securities and Exchange Commission ("SEC"), transcripts of those Synchronoss' earnings calls, excerpts which were pled in the Complaint, and various newspaper articles and reports of financial analysts (arriving to conclusions qualitatively different from, if not outright opposite to, the conclusions asserted in the Complaint as opinions of "journalists, analysts and investors").*fn30 See, generally, Docket Entries Nos. 24 and 30. However, Defendants' alleged NDAs with Apple/AT&T were neither included in these appendices nor sought to be filed, even under seal. See, generally, id. It appears that Defendants' reliance on these allegedly existing but thus-far undisclosed NDAs was the reason for Plaintiffs' Strike Motion.

B. Strike Motion

Specifically, on June 5, 2009, Plaintiffs filed -- jointly with their Opposition to Defendants' Dismissal Motion -- Plaintiffs' Strike Motion requesting the Court to strike Defendants' arguments based on these NDAs. See Docket Entry No. 27. That filing caused Defendants to submit -- together with their Reply to Plaintiffs' Dismissal Opposition -- Defendants' Strike Opposition, see Docket Entry No. 31, which -- in turn -- caused the filing of Plaintiffs' Strike Reply. See Docket Entry No. 32.

In a nutshell, Plaintiffs moving and reply points can be summarized as follows:

1. Defendants' Dismissal Opposition frequently asserts, as either an established -- or, at the very least, as a pled fact -- that Defendants were prevented from disclosing certain statistical information about iPhone sales (as well as about Synchronoss' future plans) by these thus-far undisclosed NDAs, see Strike Mot., at 1;

2. However, the legal binds ensuing from these NDAs cannot be judicially noticed since the content of these NDAs was never disclosed publically (or even to Plaintiff only, e.g., by filing under seal), see id. at 2, 5; and even if Defendants' Dismissal Motion is converted into a motion for summary judgment, Plaintiffs would still be entitled to discovery with respect to these NDAs, see id. at 2-3, 5-6; and

3. Since the content of these NDAs is neither an integral part of Plaintiffs' factual assertions nor subject to judicial notice, nor is it amenable to a summary ruling prior to Plaintiffs' completion of relevant discovery, Defendants' arguments suggesting that Defendants could not be liable for failure to make certain disclosures because of these NDAs should be striken from Defendants' Rule 12(b) Motion to Dismiss. See id. at 2-4, 6; accord Strike Opp. Defendants, in response, maintain that Plaintiffs' Strike Motion is without merit for the following reasons:

1. Instead of requesting the Court to strike any particular exhibit attached to or relied upon by Defendants, Plaintiffs move this Court to strike Defendants' argument, i.e., to strike nothing but "words",*fn31 see Strike Opp., at 1;

2. Defendants believe that this Court should accept Defendants' factual assertion as true because the pleading requirements prevent the Court from considering Plaintiffs' self-serving conclusory allegations,*fn32 see id. at 3-6, 10-12;

3. Defendants' arguments based on the NDAs are warranted because Plaintiffs used certain language in their Complaint that included references to these NDAs, specifically, when Plaintiffs made the following allegations:

[O]n October 25, 2007,... Waldis..., when asked about the gap between iPhones sold and activated,... stated that he was prevented from sharing specifics "due to NDA obligations".... [Also, during] the May 6, 2008 call,... Waldis stated:... "[W]e cannot share the specifics due to NDA obligations.... We're not allowed to discuss any of the details [relevant to] the NDA...." [In addition, Irving stated during that call:] "I've tried to provide as much information as I could without violating any NDAs that we have with our customer"...

Strike Opp., at 6-7 (quoting Compl. ¶¶ 37, 65-67);

4. Defendants believe that the Court can take judicial notice of -- apparently -- both the existence of these NDAs and the scope/application of these NDAs (seemingly, as the scope/application of these NDAs is defined by Defendants) simply because: (a) as a general matter, "courts can [take] judicial notice of information that was publicly available to reasonable investors"; and (b) Defendants repeatedly and publically made references to their alleged NDAs when Defendants made public statements; Strike Opp., at 9-10; and

5. Plaintiffs' request for conversion of the Dismissal Motion into a motion for summary judgment (with ensuing Plaintiffs' discovery rights) is without merit.

See id. at 12-15.

IV. DISCUSSION

A. Strike Motion

The Court will address the parties' contentions in conjunction with discussion of the pertinent Rules of Evidence and Rules of Civil Procedure.

1. Evidentiary Aspects

Both at common law and under the Federal Rules, most proof is presented by means of testimonial evidence or by the offering documentary evidence.

But there is an exception to the requirement that a party who relies on a certain proposition must prove it; judicial notice. Rule 201 of the Federal Rules of Evidence governs judicial notice,*fn33 providing that facts noticed may not be subject to reasonable dispute and specifying certain procedural requirements that must be followed.

Rule 201(b)... permits a district court to take judicial notice of facts that are "not subject to reasonable dispute in that [they are] either[:] (1) generally known within the territorial jurisdiction of the trial court[;] or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned."

Rule 201(b).

In re NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1331 (3d Cir. 2002) (finding that judicial notice could be properly taken with respect to "three different categories of documents [which] included: (1) documents relied upon in the Complaint ([including the defendant's] press releases); (2) documents filed [by the defendant] with the SEC; and (3) stock price data compiled by [a reliable financial] news service") (emphasis supplied); accord Jackson v. Broad. Music, Inc., 2006 U.S. Dist. LEXIS 3960, at *18 (S.D.N.Y. Jan. 31, 2006) ("the court may take judicial notice of public records and of 'admissions in pleadings and other documents in the public record filed by a party in other judicial proceedings that contradict the party's factual assertions in a subsequent action' without converting the motion into one for summary judgment") (emphasis supplied, quoting Harris v. New York State Dep't of Health, 202 F. Supp. 2d 143, 173 (S.D.N.Y. 2002), and citing Munno v. Town of Orangetown, 391 F. Supp. 2d 263, 268 (S.D.N.Y. 2005)).*fn34

Conversely, judicial notice is improper if a legitimate question exists as to the underlying source of the information. See Hinton v. Dep't of Justice, 844 F.2d 126 (3d Cir. 1988); see also Oneida Indian Nation of New York v. State of N.Y., 691 F.2d 1070 (2d Cir. 1982). Thus, while matters of which judicial notice may be taken include facts capable of immediate and certain verification by resort to sources whose accuracy is beyond dispute, accord Dashiell v. Meeks, 396 Md. 149, 174-75 (2006), accurate records or other sources of a judicially-noticed fact must necessarily exist and be known to the court to enable even the very consideration of whether the fact is amenable to judicial notice. Cf. State v. Green, 890 So. 2d 1283 (Fla. Dist. Ct. App. 2d Dist. 2005). The rationale of this proposition appears self-evident: the principle of judicial notice obligates the court to -- at the very least -- identify the source with absolute certainty; otherwise, the ability of a party to dispute this source is frustrated, and an appellate court cannot meaningfully review the lower court's decision to resort to a source whose accuracy (or even very existence) cannot reasonably be established.*fn35 See United States v. Boyd, 289 F.3d 1254 (10th Cir. 2002) ("we are mindful that if a court takes judicial notice of a fact whose application is in dispute, the court removes the weapons of rebuttal evidence, cross-examination and argument from the parties and raises doubt as to whether the parties received a fair hearing. The effect of taking judicial notice is to preclude a party from introducing contrary evidence and, in effect, directing a verdict against him as to the fact noticed"); see also State v. Gagnon, 155 N.H. 418 (2007).

Hence, while the statements made by Synchronoss in its filings made with the SEC are properly subject to judicial notice, the opinions of analysts or reporters cannot be noticed for the truth of the matter stated therein: only the fact that these opinions were published can be noticed. By the same token, while the statements contained in the Complaint (indicating that Waldis and Irving issued certain written statements and made certain oral utterances) are amenable to judicial notice, Defendants' claims (that their NDAs exist and that the terms of these NDAs both relate to Synchronoss' statements and prevented Defendants from making certain disclosure) cannot be judicially noticed: this is so simply because neither the existence of these NDAs nor their content is verified by the record or admitted by Plaintiffs. Indeed, it would be wholly anomalous for the Court to conclude that Defendants were actually subject to certain legal bonds if the Court has nether any information about the content of these bonds nor can the Court even establish that these bonds existed in actuality.*fn36 See, e.g., Hardy v. Johns-Manville Sales Corp., 681 F.2d 334, 347 (5th Cir. 1982) ("judicial notice applies [only] to self-evident truths that no reasonable person could question, truisms that approach platitudes or banalities"). Simply put, Defendants' verbal claims about these NDAs are qualitatively different from actually existing and introduced into the record NDAs. And, since the fact that a litigant uttered certain audible sounds or put certain words in writing cannot render the truthfulness of the content of these utterances/writings amenable to judicial notice, Defendant's substantive position as to Plaintiffs' Strike Motion is without merit.

2. Procedural Aspects

The Federal Rules of Civil Procedure permit an early challenge to the legal sufficiency of the allegations of a claim under both Rule 12(b)(6) and (c). When a defendant successfully challenges the plaintiff's legal entitlement to the relief demanded, even if all well-pleaded facts are taken in the light most favorable to the plaintiff, Rule 12(b)(6) permits a judgment as a matter of law in favor of the defendant. As one court put it, "[l]ike a battlefield surgeon sorting the hopeful from the hopeless, a motion to dismiss invokes a form of legal triage, a paring of viable claims from those doomed by law." Iacampo v. Hasbro, Inc., 929 F. Supp. 562, 567 (D.R.I. 1996). If any legal requirement of the claim is not plead, the motion should be granted. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); see also Advanced Cardiovascular Sys., Inc. v. Scimed Life Sys., 988 F.2d 1157, 1160 (Fed. Cir. 1993) ("The purpose of [Rule 12(b)] is to allow the court to eliminate actions that are fatally flawed in their legal premises and destined to fail, and thus spare litigants the burdens of unnecessary pretrial and trial activity"). For example, if a plaintiff seeks to recover on a tort theory but fails to allege that the defendant's actions were the cause of harm, a Rule 12(b)(6) motion is appropriate.

Of greater importance as a true summary adjudication method is a Rule 12(b)(6) motion which challenges the plaintiff's entitlement to relief upon the legal theory pleaded. For example, a plaintiff seeking recovery under a theory of negligent infliction of emotional distress under circumstances in which the governing law would not recognize the cause of action -- under the facts as they are pled -- may suffer judgment as a matter of law because recovery simply cannot be had as alleged.

Rule 12(c) similarly permits an adjudication based purely on the allegations of the pleadings, be these pleadingseither the complaintor the answer.*fn37 Indeed, this motion is particularly useful when the answer admits the allegations of the complaint, for example that a debt is owed as claimed, but raises a defense that is insufficient in law. See, e.g., St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 521-22 (1993) ("A defendant whose answer fails to contest critical averments in the complaint will, on motion, suffer a judgment on the pleadings").

Hence, both Rule 12(b) and Rule 12(c) motions are "summary proceedings" on the merits in the sense that they deal directly with the existence of a meritorious claim or defense. See Labaton and Sternberg, Using and Protecting Against Rule 12(b)(6) and Rule 9(b) Motions, 4 Practical Litig. 79 (1993); Hamabe, Functions of Rule 12(b)(6) in the Federal Rules of Civil Procedure: A Categorization Approach, 15 Campbell L. Rev. 119 (1993). That is why the Court of Appeals stated that, "[u]nder Rule 12(c), judgment will not be granted unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law." Bayer Chems. Corp. v. Albermarle Corp., 171 Fed. Appx. 392, 397 (3d Cir. 2006).

Here, Defendants' NDAs-related assertions introduced in the Dismissal Motion (i.e., assertions that Defendants' refusal to disclose certain information was proper because of the existence, content and application of the alleged NDAs) are, effectively, assertions of the type that could only be included, as a defense, in Defendants' answer rather than in their Rule 12(b) motion. Hence, it is hardly surprising that -- being presented with Defendants' quasi-answer statements meshed into Defendants' Dismissal Motion -- Plaintiffs mounted a quasi-Rule 12(c) challenge, although they labeled their application"Motion to Strike." In light of the foregoing, it appears self-evident that, at the instant juncture, Plaintiffs' Strike Motion should be dismissed as premature. If this matter proceeds past Rule 12(b) dismissal stage, and Defendants' answer raises the alleged NDAs as a defense, then Plaintiffs can renew their motion under Rule 12(c), or either side can seek a full or partial summary judgment on the grounds of these NDAs, that is, provided that neither the existence nor the scope/application of these NDAs is in dispute.

B. Dismissal Motion

1. Pleading Requirements

The standard of review under Rule 12(b)(6) is well-settled: the question is whether the plaintiff should be given an opportunity to offer evidence in support of plaintiff's claims, not whether the plaintiff will ultimately prevail in a trial on the merits. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds, Harlow v. Fitzgerald, 457 U.S. 800 (1982); Allegheny Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429, 434-35 (3d Cir. 2000). However, qualitatively different pleading requirements apply to those assertions that are subject to Rule 8 and to those that are examined under Rule 9.

a. Rule 8 Pleadings

It is long established that a court should "accept as true all of the [factual] allegations in the complaint and reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the plaintiff." Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir. 1997). Nonetheless, the Third Circuit has noted that courts are not required to credit bald assertions or legal conclusions improperly alleged in the complaint. See Burlington Coat Fact. Sec. Litig., 114 F.3d 1410, 1429 (3d Cir. 1997). Therefore, legal conclusions draped in the guise of factual allegations may not benefit from the presumption of truthfulness. See Nice Sys., Ltd. Sec. Litig., 135 F. Supp. 2d 551, 565 (D.N.J. 2001).

Last year, addressing the clarifications as to the litigant's pleading requirement stated by the United States Supreme Court in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the Court of Appeals for the Third Circuit provided the district courts with guidance as to what pleadings are sufficient to pass muster under Rule 8. See Phillips v. County of Allegheny, 515 F.3d 224, 230-34 (3d Cir. 2008). Specifically, the Court of Appeals observed as follows:

"While a complaint... does not need detailed factual allegations, a plaintiff's obligation [is] to provide the 'grounds' of his 'entitle[ment] to relief'...." Twombly, 127 S.Ct. at 1964-65..."[T]he threshold requirement of Rule 8(a)(2) [is] that the 'plain statement [must] possess enough heft to 'sho[w] that the pleader is entitled to relief.'" Id. at 1966. [Hence] "factual allegations must be enough to raise a right to relief above the speculative level." Id. at 1965 & n.3....

Id. at 230-34 (original brackets removed). This pleading standard was further refined by the United States Supreme Court in its recent decision Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009):

[In any civil action, t]he pleading standard... demands more than an unadorned ["]the-defendant-unlawfully-harmed-me["] accusation. [Twombly, 550 U.S.] at 555.... A pleading that offers "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." [Id.] at 555. [Moreover,] the plausibility standard... asks for more than a sheer possibility that a defendant has acted unlawfully. Id. [Indeed, even w]here a complaint pleads facts that are "merely consistent with" a defendant's liability, [the so-alleging complaint still] "stops short of [showing] plausibility of 'entitlement to relief.'" Id. at 557 (brackets omitted). [A fortiori,] the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions [or to t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements [,i.e., by] legal conclusion[s] couched as a factual allegation [e.g.,] the plaintiffs' assertion of an unlawful agreement [or] that [defendants] adopted a policy "'because of,' not merely 'in spite of,' its adverse effects upon an identifiable group.".... [W]e do not reject these bald allegations on the ground that they are unrealistic or nonsensical.... It is the conclusory nature of [these] allegations... that disentitles them to the presumption of truth.... [Finally,] the question [of sufficiency of] pleadings does not turn [on] the discovery process. Twombly, 550 U.S.] at 559.... [The plaintiff] is not entitled to discovery [where the complaint alleges any of the elements] "generally," [i.e., as] a conclusory allegation [since] Rule 8 does not [allow] pleading the bare elements of [the] cause of action [and] affix[ing] the label "general allegation" [in hope of developing facts through discovery].

Iqbal, 129 S.Ct. at 1949-54.*fn38

The Third Circuit observed that Iqbal provided the "final nail-in-the-coffin" for the "no set of facts" standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46 (1957),*fn39 which was applied to federal complaints before Twombly. See Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009). Since Iqbal, the Third Circuit has required the district courts to conduct, with regard to Rule 8 allegations, a two-part analysis when presented with a motion to dismiss:

First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. [See Iqbal, 129 S.Ct. at 1949-50]. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a "plausible claim for relief" [in light of the definition of "plausibility" provided in Iqbal.] In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to "show" such an entitlement with its facts. See Phillips, 515 F.3d at 234-35. As the Supreme Court instructed in Iqbal, "[w]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not 'show[n]'-'that the pleader is entitled to relief.'" Iqbal, [129 S.Ct. at 1949-50 (emphasis supplied)]. This "plausibility" determination will be "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.

Fowler, 578 F.3d at 210-11 (emphasis supplied). b Pleading Under Rule 9 and the Reform Act In comparison to Rule 9, Rule 8 -- even as interpreted in Iqbal and clarified in Fowler -- still sets forth merely the floor pleading standard, simply because the very language of Rule 9 imposes a heightened pleading requirement by demanding factual particularity with respect to allegations of fraud.*fn40 "This particularity requirement has been rigorously applied in securities fraud cases." Burlington, 114 F.3d at 1417 (citations omitted). Consequently, a plaintiff averring securities fraud claims must specify "'the who, what, when, where, and how: the first paragraph of any newspaper story.'" Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir. 1999) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)).

The Third Circuit clarified:

[a]lthough Rule 9(b) falls short of requiring every material detail of the fraud such as date, location, and time, plaintiffs must use "alternative means of injecting precision and some measure of substantiation into their allegations of fraud." Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002) (quoting Nice Sys., 135 F. Supp. 2d at 577).

In addition to the Rule 9(b) requirements, a plaintiff alleging securities fraud must comply with the heightened pleading requirements of the Reform Act. See 15 U.S.C. § 78u-4(b)(1) and (b)(2). Specifically, § 78u-4(b)(1) of the Reform Act requires the plaintiff to detail the facts indicating the falsity of the challenged statement. See 15 U.S.C. § 78u-4(b)(1) (the plaintiff must "specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed"). Similarly, the Reform Act requires that "the complaint shall, with respect to each act or omission..., state with particularity [all] 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).

Consequently, Rule 9 and the Reform Act modified the traditional Rule 12(b)(6) analysis. "'[W]hereas under Rule 12(b)(6), we must assume all factual allegations in the complaint are true... under the Reform Act, we disregard 'catch-all' or 'blanket' assertions that do not live up to the particularity requirements of the statute,'" even if these assertions meet the Iqbal-defined Rule 8 pleading requirements. Rockefeller Center, 311 F.3d at 224 (quoting Florida State Bd. of Admin. v. Green Tree Fin. Corp., 270 F.3d 345, 660 (8th Cir. 2001)). "The Reform Act requires a 'strong inference' of scienter, and accordingly, alters the normal operation of inferences under Rule 12(b)(6)." Digital Island Sec. Litig., 357 F.3d 322, 328 (3d Cir. 2004) (citing Rockefeller Ctr., 311 F.3d at 224, stating that, "unless plaintiffs in securities fraud actions allege facts... with the requisite particularity... they may not benefit from inferences flowing from vague or unspecific allegations-inferences that may arguably have been justified under a traditional Rule 12(b)(6) analysis"); see also Greebel v. FTP Software, Inc., 194 F.3d 185, 196 (1st Cir. 1999) ("A mere reasonable inference is insufficient to survive a motion to dismiss"). A plaintiff's failure to meet these heightened pleading requirements results in dismissal of the complaint. See Advanta, 180 F.3d at 531.

Two years ago, in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007), the Supreme Court elaborated on the issue of what factual allegations satisfy plaintiff's obligation to plead an element subject to these heightened pleading requirements. The majority opinion stressed that the facts alleged "must be cogent and compelling, thus strong in light of other explanations." Id. at 324. Moreover, the Supreme Court expressly guided that the district court shall dismiss as insufficient those factual allegations "from which an inference [only] could be drawn." Id. (emphasis in original). The Court of Appeals for the Third Circuit emphasized this requirement. See Winer Family Trust, 503 F.3d 319 (3d Cir. 2007) (collecting relevant decisions by various courts of appeals and citing Higginbotham v. Baxter Int'l, Inc., 495 F.3d 753, 755 (7th Cir. 2007), for the proposition that a plaintiff's factual pleading must yield, at the very least, an inferenceas compelling as any competing inference); see also Cent. Laborers' Pension Fund v. Integrated Elec. Servs., 497 F.3d 546, 550 (5th Cir. 2007) (courts must consider both culpable and non-culpable explanations); ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 104 (2d Cir. 2007) (where a plausible non-culpable explanation is more likely than any guilty inference, the court must find that plaintiffs failed to state a claim); Belizan v. Hershon, 495 F.3d 686, 690 (D.C. Cir.2007) (district court's failure to conduct a comparison of alleged culpable and plausible non-culpable explanation warrants remand).

2. Substantive Law

Section 10(b) proscribes the "use or employ[ment], 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." 15 U.S.C. § 78j(b). The ensuing Rule 10b-5, 17 C.F.R. § 240.10b-5, makes it illegal "[t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made in the light of the circumstances under which they were made, not misleading... in connection with the purchase or sale of any security." 17 C.F.R. § 240.10b-5(b).

While "[t]he private right of action under Section 10(b) and Rule 10b-5 reaches beyond statements and omissions made in a registration statement or prospectus or in connection with an initial distribution of securities and creates liability for false or misleading statements or omissions of material fact that affect trading on the secondary market," Burlington, 114 F.3d at 1417 (citing Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994)); see also Eckstein v. Balcor Film Investors, 8 F.3d 1121, 1123-24 (7th Cir. 1993), cert. denied, 510 U.S. 1073 (1994), a Rule 10b-5 plaintiff must still: (a) establish that the defendant made a materially false or misleading statement; (2) demonstrate that the defendant acted with scienter; and (3) show that plaintiff's reliance on defendant's misstatement caused injury to the plaintiff. See Burlington, 114 F.3d at 1417 (citing Phillips Petroleum Sec. Litig., 881 F.2d 1236, 1243 (3d Cir. 1989); San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Cos., Inc., 75 F.3d 801, 808 (2d Cir. 1996)).

a. Element Pled Pursuant to Rule 8: Materiality

The test of materiality depends not upon the literal truth of statements but upon the ability of reasonable investors to become accurately informed, see McMahan & Co. v. Warehouse Entertainment, Inc., 900 F.2d 576, 579 (2d Cir. 1990), cert. denied, 501 U.S. 1249 (1991); this is sometimes referred to as the mosaic representation thesis. See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976); Genentech, Inc. Sec. Litig., 1989 WL 137189 (C.D. Cal. 1989). Thus, a finding of materiality is based on the total mix of information available, see Ieradi v. Mylan Labs., Inc., 230 F.3d 594 (3d Cir. 2000), and the concept of materiality cannot be distilled into a bright-line test, see Basic Inc. V. Levinson, 485 U.S. 224 (1988), see also Shapiro v. UJB Fin. Corp., 964 F.2d 272, 281 (3d Cir. 1992); Ganino v. Citizens Utilities Co., 228 F.3d 154 (2d Cir. 2000), short of stating that an alleged misrepresentation cannot be deemed material to an investor if the general public has access to correct information. See Basic, 485 U.S. at 231-32; Wallace v. Sys. & Computer Tech. Corp., 1997 U.S. Dist. LEXIS 14677, at *42-44 (E.D. Pa. Sept. 22, 1997).

The fact that materiality is determined in context means that a purchaser or seller of securities is not necessarily entitled to all information relating to each of the circumstances surrounding the transaction. See Acito v. IMCERA Group, 47 F.3d 47 (2d Cir. 1995) (deficiencies found by FDA inspectors at one of many business locations were not material); Wilensky v. Digital Equip. Corp., 903 F. Supp. 173 (D. Mass. 1995), aff'd in part, rev'd in part on other grounds, 82 F.3d 1194 (1st Cir. 1996) (failure to disclose details of new marketing strategy was immaterial); accord Press v. Quick & Reilly, Inc., 218 F.3d 121 (2d Cir. 2000) (intermediary's conflict of interest is immaterial); Carter-Wallace, Inc. v. Hoyt, 150 F.3d 153 (2d Cir. 1998) (departure from the generally accepted accounting principles cannot qualify as a material element for the purposes of securities fraud action). It is not sufficient to show that a shareholder might have found the information to be of interest: the plaintiff has to establish the importance of the particular piece of information to a reasonable investor. See Burlington, 114 F.3d at 1432 ("'[A] corporation is not required to disclose a fact merely because a reasonable investor would very much like to know that fact.' [Management's] possession of material nonpublic information alone does not create a duty to disclose it") (quoting Time Warner Sec. Litig., 9 F.3d 259, 267 (2d Cir. 1993), and citing Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1202 (1st Cir. 1996), and Roeder v. Alpha Indus., Inc., 814 F.2d 22, 26 (1st Cir. 1987)); Milton v. Van Dorn Co., 961 F.2d 965 (1st Cir. 1992) (where plaintiffs bought the stock of a subsidiary company of the parent corporation and, after the sale was completed, another of the parent corporation's subsidiaries announced plans to begin producing a product that would compete with plaintiffs' product, the court found that nondisclosure of the other subsidiary's production plans was immaterial).

b. Elements Pled Pursuant to Rule 9

While the Reform Act mandates heightened pleading requirements as to the scienter element, loss causation is not one of the § 10(b) elements with respect to which the Reform Act imposes a more stringent pleading requirement. See In Re Mutual Funds Invest. Litig., 566 F.3d 111, 119-20 (4th Cir. 2009) ("the PSLRA's heightened pleading requirements do not govern our analysis of the elements of reliance or loss causation"). However, the element of reliance is still subject to Rule 9(b) requirements. See, e.g., id. at 120. i. Reliance The reliance requirement is a corollary of materiality. See Semerenko v. Cendant Corp., 233 F.3d 165, 180 (3d Cir. 2000). As under common law, the reliance requirement applies in securities fraud cases, and reliance is an element of a private claim under Rule 10b-5. See List v. Fashion Park, Inc., 340 F.2d 457, 452 (2d Cir. 1965), cert. denied, 382 U.S. 811, reh'g denied, 382 U.S. 933 (1965). Since proving reliance could be hard in view of the nature of modern securities markets, federal courts fashioned a "fraud-on-the-market" presumption for proving reliance based on the Efficient Capital Market Hypothesis, i.e., the premise that, if the market is efficient, the information disclosed by issuers, issuers' agents and analysts is both available to and swiftly absorbed by the investors. See Basic, 485 U.S. 224; Hayes v. Gross, 982 F.2d 104 (3d Cir. 1992).

The court in Cammer v. Bloom, 711 F. Supp. 1264, 1276 n.17 (D.N.J. 1989), appeal dismissed, 993 F.2d 875 (3d Cir. 1993), set out the key terms enabling plaintiff's usage of the fraud on the market theory: (1) an open market, in which anyone, or at least a large number of persons, can buy or sell; (2) a developed market, which has a relatively high level of activity and frequency, and for which trading information is widely available, e.g., a secondary market in outstanding securities which usually has continuity, liquidity and the ability to absorb a reasonable amount of trading with relatively small price changes; (3) an efficient market, which rapidly reflects new information in price; and (4) cumulative effect of these terms, so the developed market is both open and efficient. See Enron Corp. Sec. Derivative & "ERISA" Litig., 2006 U.S. Dist. LEXIS 43146, at *95 (S.D. Tex. June 5, 2006) (relying on Cammer).

Since the New York and American Stock Exchanges are examples of open and developed securities markets, see id., and Synchronoss' common stock is registered with the United States Securities and Exchange Commission and traded on the NASDAQ,*fn41 the case at bar is subject to both the Efficient Capital Market Hypothesis and the fraud on the market presumption. ii. Scienter Rule 10b-5 describes the type of conduct proscribed but it does not set out the appropriate standard of culpability. The Supreme Court held in Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976), that, in order to establish a valid claim under Rule 10b-5, the plaintiff must prove that the defendant acted with scienter. The scienter requirement is satisfied by a showing of intentional misrepresentation made with intent to deceive.*fn42

Since scienter is based on the defendant's state of mind and, as such, may be difficult to prove without direct evidence, courts are willing to permit inferences that the defendant acted with the requisite scienter. See, e.g., Fine v. American Solar King Corp., 919 F.2d 290 (5th Cir. 1990), cert. dismissed, 502 U.S. 976 (1991). However, such inferences are not to be made lightly. See, e.g., Rothman v. Gregor, 220 F.3d 81 (2d Cir. 2000) ($1.6 million dollar profit from inside trading was not sufficiently unusual to provide an inference of scienter). The inference may be made only when the fact pattern unambiguously indicates that the defendant was acting with the requisite state of mind. See, e.g., Phillips Petroleum Sec. Litig., 881 F.2d 1236 (defendant's good faith statement of present intent does not become actionable simply because of defendant's change of intent at a later point). Thus, to withstand the scrutiny imposed by the Reform Act, the inference of scienter must be: (1) reasonable: (2) strong; and (3) based on pleadings stating the pertinent facts with particularity. See 15 U.S.C. § 78u-4(b)(1) and (2) (the plaintiff shall state "the reason... why the [challenged] statement [was] misleading, and... all facts on which [plaintiff's] belief is formed," as well as "particular[] facts giving rise to a strong inference that the defendant acted with the required state of mind"); Alpharma Sec. Litig., 372 F.3d 137, 150 (3d Cir. 2004); The End of the Unbearable Lightness of Pleading: Scienter After Silicon Graphics, 48 UCLA L. Rev. 973 (2001) (detailing the development of both elements).

A plaintiff may establish the requisite strong inference of fraudulent intent in one of two ways: (1) by alleging facts "establishing a motive and an opportunity to commit fraud"; or (2) "by setting forth facts that constitute circumstantial evidence of either recklessness or conscious behavior." Advanta, 180 F.3d at 534; see also Burlington, 114 F.3d at 1418. If the plaintiff desires to employ the "motive and opportunity" method, the plaintiff should demonstrate a logical connection between the alleged fraud and motive in order to establish a reasonable inference of fraud. See Glickman v. Alexander & Alexander Servs., 1996 U.S. Dist. LEXIS 2325, at *36 (S.D.N.Y. Feb. 27, 1996) ("[There should be a] coherent nexus between the alleged fraudulent conduct and its alleged purpose"). Furthermore, there must be more than conclusory allegations of motive and opportunity; stating that "the defendant must have known" is not legally sufficient. See, e,g., Mortensen v. AmeriCredit Corp., 123 F. Supp. 2d 1018 (N.D. Tex. 2000); Livent, Inc. Sec. Litig., 78 F. Supp. 2d 194 (S.D.N.Y. 1999). A "strong inference" may arise only if the complaint sufficiently alleges that the defendants: (1) "benefitted in a concrete and personal way from the purported fraud"; (2) "engaged in deliberately illegal behavior"; (3) "knew facts or had access to information suggesting that their public statements were not accurate"; or (4) "failed to check information they had a duty to monitor."*fn43 Novak v. Kasaks, 216 F.3d 300, 311 (2d Cir. 2000); see Wilson v. Bernstock, 195 F. Supp. 2d 619, 633 (D.N.J. 2002) ("Motive entails allegations that the individual corporate defendants stood to gain in a concrete and personal way from one or more of the allegedly false or misleading statements and wrongful nondisclosures.... [M]otive and opportunity 'like all other allegations of scienter must now be supported by facts stated with particularity and must give rise to a strong inference of scienter'") (quoting Advanta, 180 F.3d at 535); Cybershop.com Sec. Litig., 189 F. Supp. 2d 214 (D.N.J. 2002).

Under this pleading standard, a plaintiff may not rely on facts indicating that the defendant had certain goals or aspirations common to the aspirations held by law-abiding business community: such goals or practices cannot amount to a valid motive for the purposes of showing scienter. See GSC Partners CDO Fund, 368 F.3d at 237 ("Motives that are generally possessed by most corporate directors and officers do not suffice") (quoting Kalnit v. Eichler, 264 F.3d 131, 139 (2d Cir. 2001) (capitalization restored); San Leandro, 75 F.3d at 814 ("[A] company's desire to maintain a high bond or credit rating" is an insufficient motive for fraud because such motive could be imputed to any company. "If scienter could be pleaded on that basis alone, virtually every company in the United States that experiences a downturn in stock price could be forced to defend securities fraud actions"); Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1068 (5th Cir.1994) ("[I]ncentive compensation can hardly be the basis on which an allegation of fraud is predicated") (citation omitted); Nice Sys., 135 F. Supp. 2d at 584) ("[T]he allegation that [d]efendants made false and misleading statements to secure market share is... insufficient to demonstrate that [d]efendants had a motive to commit fraud"); Boeing Sec. Litig., 40 F. Supp. 2d 1160, 1175 (W.D.Wash. 1998) ("[T]he desire to remain profitabl[e] is a generic motive that fails to satisfy the heightened pleading standards for scienter under the PSLRA").

While the aforesaid pleading requirement is quite stringent, the plaintiff in a securities fraud action can support his/her complaint by using information attributed to confidential sources. See Novak, 216 F.3d at 313-14 (holding that, while the PSLRA "may compel revelation of confidential sources under certain circumstances," there was no per se requirement of disclosure if the plaintiff states sufficient facts to support plaintiff's allegations). That being said, statements from undisclosed confidential sources can be used in only two situations: (1) if the complaint sets forth other factual allegations, such as documentary evidence that are nearly sufficient to support a fraud allegation, see id. at 314; see also Royal Dutch/Shell Transp. Sec. Litig., 380 F. Supp. 2d 509 (D.N.J. 2005) (finding sufficient corroboration in specific notes, memoranda, emails and presentation materials); Barnum v. Millbrook Care Ltd. Partnership, 850 F. Supp. 1227, 1232-33 (S.D.N.Y. 1994) (if the allegations are contradicted by the documents, the documents control), aff'd, 43 F.3d 1458 (2d Cir. 1994); or (2) when the confidential sources are described in the complaint with such degree of particularity as to support the inference that the confidential source is a person in a position to possess the specific information alleged. See Royal Dutch/Shell Transp. Sec. Litig., 380 F. Supp. 2d 509.

Elaborating on this latter scenario, the Third Circuit explained that the complaint must disclose: (1) the time period during which the confidential source worked at the defendant-company, (2) the particular dates on which the relevant information was acquired, and (3) the facts thoroughly detailing how the source obtained access to the information at issue. See Cal. Pub. Emples'. Ret. Sys. v. Chubb Corp., 394 F.3d 126, 146 (3d Cir. 2004); Freed v. Universal Health Servs., 2005 U.S. Dist. LEXIS 7789 (E.D. Pa. May 3, 2005); Portal Software, Inc. Secs. Litig., 2005 U.S. Dist. LEXIS 20214, at *28 (N.D. Cal. Aug. 10, 2005) ("[P]laintiffs must describe the job title, job description, duties, and dates of employment for the controller's sources before this information can be deemed reliable"). Moreover, the Third Circuit held that allegations attributed to the information obtained from a confidential source must contain specific details regarding the basis for the source's personal knowledge and describe supporting events in detail. See Chubb, 394 F.3d at 146; see also Northpoint Commc'ns Group, Inc., Sec. Litig., 184 F. Supp. 2d 991, 999-1000 (N.D. Cal. 2001); U.S. Aggregates, Inc. Sec. Litig., 235 F. Supp. 2d 1063, 1074 (N.D. Cal. 2002); Ramp Networks, Inc., 201 F. Supp. 2d 1051, 1067 (N.D. Cal. 2002). Failure to meet these requirements with respect to each confidential source the plaintiff relies upon renders that source irrelevant for the purposes of plaintiff's allegations. See Chubb, 394 F.3d at 146. Moreover, "[t]he sheer volume of confidential sources cited cannot compensate for these inadequacies.... Cobbling together a litany of inadequate allegations does not render those allegations particularized in accordance with Rule 9(b) or the PSLRA." Id. at155; see also Am. Bus. Fin. Servs., Inc. Sec. Litig., 413 F. Supp. 2d 378, 391-92 (E.D. Pa. 2005) (finding statements from five meagerly identified confidential sources insufficient). iii. Forward-looking Statements The above-discussed requirement to prove scienter is reflected in Section 21E of the 1934 Act, 15 U.S.C. § 78u-5(c), which provides guidance to corporate managers wishing to issue forward-looking projections without risking legal liability. To be protected by 15 U.S.C. § 78u-5(c), an issuer (or the issuer's agents) must identify all written or oral forward-looking statements as forward-looking (or couch these statements in such terms that the forward-looking nature of these statements would be self-evident to a reasonable investor),*fn44 see Clorox Co. Secs. Litig., 238 F. Supp. 2d 1139, at *16 (N.D. Cal. 2002) ("[A] prediction about future events is self-evidently a forward-looking statement"), and either: (1) accompany these projections with a sufficient cautionary language; or (2) make these projections without actual knowledgethat the projections are false or misleading. See 15 U.S.C. §§ 78u-5(c)(1)(B)(i) and 78u-5(c)(1)(B)(ii)(II).*fn45 The speaker's inclusion of cautionary language in his/her non-scienter-state-of-mind announcement yields a dual isolation of the speaker from liability.

When the plaintiff challenges a forward-looking statement made by the defendant, the plaintiff's mere usage of catchwords or bold assertions that defendant's statement was false or misleading because the defendant knew -- or should have known -- the statement to be false or misleading cannot lend support to plaintiff's claim. See GSC Partners CDO Fund v. Washington, 368 F.3d 228, 239 (3d Cir. 2004) ("[I]t is not enough for plaintiffs to merely allege that defendants 'knew' their statements were fraudulent or that defendants 'must have known' their statements were false"); Read-Rite Corp. Sec. Litig., 115 F. Supp. 2d 1181 (N.D. Cal. 2000) (conclusory allegations that the corporate officers must have known the falsity were insufficient). Consequently, plaintiff's failure to plead with specificity the facts showing that defendant's forward-looking statements were made by the defendant with defendant's actual knowledge that these statements were false precludes plaintiff's claim, and plaintiff's allegation that the defendant was reckless in defendant's projections is insufficient.*fn46 See 15 U.S.C. § 78u-5(c)(1)(B).

It shall also be noted that a company's management is not responsible for opinions, projections and estimates of security analysts, even if the management may have supplied the analysts with some of the information they used to formulate their estimates,*fn47 unless the plaintiff sets forth facts indicating that the management either: (1) retained the services of the analysts; or (2) passed a clear misinformation to the analysts with intention that the analysts would communicate the misinformation to the market. See V-Mark Software, Sec. Litig., 928 F. Supp. 122 (D. Mass. 1996). In the latter scenario, the complaint must allege "facts showing that a particular defendant both made the statement to the analyst and controlled the content of the [analyst's] report." U.S. Interactive, Inc. Sec. Litig., 2002 U.S. Dist. LEXIS 16009, *48 (E.D. Pa. Aug. 23, 2002) (citing Klein v. Gen. Nutrition Cos., 186 F.3d 338, 345 (3d Cir. 1999)). "The complaint must rise or fall on allegations about defendant['s] conduct and not on wide-eyed citation to the gratuitous commentary of outsiders." Hershfang v. Citicorp, 767 F. Supp. 1251, 1255 (S.D.N.Y. 1991).

Finally, "general statements of optimism 'constitute no more than puffery, and [being] understood by reasonable investors as such,'" cannot amount to fraudulent information. Advanta, 180 F.3d at 538 (quoting Burlington, 114 F.3d at 1428 n.14); see also ATI Techs., Inc. Sec. Litig., 216 F. Supp. 2d 418, 433 (E.D. Pa. 2002) (holding that "[a] spin on its historical performance, as setting a 'record in revenue,' conferring a 'strong start,' and giving... 'market leadership,' is puffery"); cf. San Leandro, 75 F.3d at 811. Indeed, the Third Circuit expressly clarified that "[c]laims that... expressions of hope by corporate managers could dupe the market have been... uniformly rejected by the courts." Burlington, 114 F.3d at 1427; see also Parnes v. Gateway 2000, Inc., 122 F.3d 539, 547 (8th Cir. 1997) ("[S]ome statements are so vague and such obvious hyperbole that no reasonable investor would rely upon them"). For instance, statements by the defendant that merely express defendant's confidence with respect to future results on the basis of previous successes are not actionable. See Advanta, 180 F.3d at 538. iv. Omissions

"When an allegation of fraud is based upon nondisclosure, there can be no fraud absent a duty to speak [since a] duty to disclose under § 10(b) does not arise from the mere possession of nonpublic market information."*fn48 Chiarella v. United States, 445 U.S. 222, 235 (1980). As the Third Circuit explained,

"Silence, absent a duty to disclose, is not misleading under Rule 10b-5." Basic, Inc. v. Levinson, 485 U.S. 224, 239 n.17 (1988); see also Burlington, 114 F.3d at 1432 ("Except for specific periodic reporting requirements... there is no general duty on the part of a company to provide the public with all material information"). Such a duty to disclose may arise when there is [an incident of] insider trading, [or presence of] a statute requiring disclosure, or [there was] an inaccurate, incomplete or misleading disclosure [requiring a corrective statement]. See Glazer v. Formica Corp., 964 F.2d 149, 157 (2d Cir. 1992); Backman v. Polaroid Corp., 910 F.2d 10, 12 (1st Cir. 1990) (en banc); General Motors Class E Stock Buyout Sec. Litig., 694 F. Supp. 1119, 1129 (D. Del. 1988).

Oran v. Stafford, 226 F.3d 275, 286-87 (3d Cir. 2000); see also Winer, 503 F.3d at 329.

c. Liability of Controlling Person

Section 20(a) of the 1934 Act, 15 U.S.C. § 78(a), states that "[e]very person who, directly or indirectly, controls any person liable [for securities fraud] shall also be liable jointly and severally with and to same extent as such controlled person." 15 U.S.C. § 78t(a). Thus, for a controlling person to be liable, the person over whom control was exercised must have committed a primary violation of the securities laws. See Merck & Co. Sec. Litig., 432 F.3d 261 (3d Cir. 2005); Digital Island Sec. Litig., 357 F.3d at 337; Shapiro, 964 F.2d at 279. To establish a prima facie case that the defendant was a controlling person within the meaning of Section 20(a), the plaintiff must show that:

(1) the defendant had actual power or influence over the controlled person; and (2) the defendant actually participated in the alleged illegal activity.*fn49 See Kersh v. General Council of the Assemblies of God, 804 F.2d 546, 548 (9th Cir. 1986); Rochez Bros., Inc. v. Rhoades, 527 F.2d 880, 885 (3d Cir. 1975); MobileMedia Secs. Litig., 28 F. Supp. 2d 901, 940 (D.N.J. 1998); Klein v. Boyd, 949 F. Supp. 280 (E.D. Pa. 1996), aff'd in part, rev's on other grounds, 1998 U.S. App. LEXIS 2004 (3d Cir. Feb. 12, 1998); Gordon v. Diagnostek, Inc., 812 F. Supp. 57 (E.D. Pa. 1993).

3. Claims Based on Defendants' Forward-Looking Statements

Defendants maintain that they are not liable for the alleged falsity of their forward-looking statements because: (a) each of these statements was accompanied by a sufficient cautionary language; and/or (b) each of these statements was made without scienter. See generally, Dismissal Mot., at 14-34. However, while -- as detailed below -- Defendants' position appears factually warranted and legally valid with regard to some of Plaintiffs' challenges, Defendants' arguments are factually and legally inapposite to Plaintiffs' challenges based on those occurrences which Plaintiffs elects to qualify as forward-looking statements about Synchronoss' projected involvement in the off-site activation of the iPhone 3G. The Court, therefore, begins its discussion with this line of allegations.

a. Future Projections Allegedly Related to the iPhone 3G

It appears that Plaintiffs base this line of allegations on the following occurrences:

a. Publication of certain unspecified statements made, presumably, by Defendants on unspecified dates prior to the Class Period.*fn50 Plaintiffs: (i) first deduced from the unspecified language of these unspecified statements that Synchronoss decided to "widely publicize" its 2007 multi-year contract with Apple/AT&T, pursuant to which Synchronoss' ConvergenceNow was utilized to support the launch and ongoing operational of "the Apple iPhone"; and (ii) then deduced from their prior deducement that, since this "wide publication" utilized the phrase "the Apple iPhone," the publication expressed Synchronoss' position that its software would be utilized in off-site activation of either all future models of the iPhone or, at the very least, of the iPhone 3G;

b. Rise of certain rumors of unspecified content and of equally unspecified origin about upcoming release of the iPhone 3G. Plaintiffs -- as well as certain financial analysts and/or journalists unrelated to Defendants, upon whose opinions Plaintiffs elected to rely -- first deduced from these rumors that the iPhone 3G would necessarily be available for off-site activation, and then deduced from their prior deducement that Synchronoss' ConvergenceNow (or some other Synchronoss' software) would necessarily be utilized for such activation of the iPhone 3G;

c. On February 4, 2008, Waldis stated: "We are extremely pleased with the continued high level performance that our ConvergenceNow [program] has delivered [for the purposes of] activation of the Apple iPhone." Plaintiffs, again, deduced from this statement -- and from Waldis' usage of the phrase "the Apple iPhone" -- that: (i) the iPhone 3G would necessarily be available for off-site activation; and (ii) Synchronoss' software would necessarily be utilized for such activation;

d. Similarly, when -- on February 4, 2008 -- Irving forecasted Synchronoss first-quarter-of-2008 revenue at $30 to 32 million, and full revenue for the year 2008 at $151 to $160 million, Plaintiffs, too, deduced from these figures that Irving must have made this financial assessments on the premise that this particular revenue could not be obtained by Synchronoss unless Synchronoss is involved in off-site activation of the iPhone 3G. Plaintiffs made an identical chain of deducements from Syncronoss' February 29, 2008, Report that repeated the dollar figures uttered by Irving; and

e. In the same fashion, Plaintiffs deduced from Irving's general statement of optimism ("we are more optimistic about [Synchronoss'] long-term future than at any point in our history") and from Waldis' generic optimistic statement ("Synchronoss is well positioned to benefit from multiple growth opportunities' and [that he] was 'optimistic about [Synchronoss'] ability to take advantage of those opportunities based on Synchronoss' unique ConvergenceNow") the familiar two conclusions, namely, that: (i) the iPhone 3G would necessarily be available for off-site activation; and (ii) Synchronoss' ConvergenceNow would necessarily be utilized for such activation.

Defendants' position (e.g., that the statements challenged were accompanied by a sufficient cautionary language) cannot be true with regard to, at the very least, the alleged rumors (since Defendants' had no means to inject any cautionary language into someone else's rumors), and the Court has no way to establish the presence of any cautionary language in the unspecified Defendants' statements (where Synchronoss, allegedly, "widely publicize" its multi-year involvement in "the Apple iPhone"). However, neither the issue of the cautionary language nor even that of scienter has any relevance to the occurrences discussed in all the above-listed subparagraphs, (a) to (e), since each and every allegation made by Plaintiffs fails to point out any false statement by Defendants: rather, all these allegations point to false deducements made by Plaintiffs and/or by the journalists and analysts upon those whose opinions Plaintiffs elected to rely. Consequently, Plaintiffs' allegations are facially insufficient. Accord V-Mark Software, Sec. Litig., 928 F. Supp. 122 (dismissing allegations unless the complaint alleged "facts showing that a particular defendant both made the statement to the analyst and controlled the content of the [analyst's] report"); see also U.S. Interactive, Inc. Sec. Litig., 2002 U.S. Dist. LEXIS 16009, *48.

Moreover, neither the fact of Synchronoss' publicized pride in its contract with Apple/AT&T (even if true), nor Waldis and Irving' pride in -- and/or optimism about -- the performance of ConvergenceNow or Synchronoss' market position and business future, can qualify as a statement falsely indicating that Synchronoss would be involved in activation of the iPhone 3G. Not only do these statements present immaterial puffery incapable of resulting in legal liability, see Advanta, 180 F.3d at 538 (discussing lack of legal liability for puffery); Parnes, 122 F.3d at 547 (same); Burlington, 114 F.3d at 1427-28 and n.14 (same); San Leandro, 75 F.3d at 811 (same); ATI Techs., Inc. Sec. Litig., 216 F. Supp. 2d at 433 (same), they flatly lacked any reference to the iPhone 3G. Similarly, Synchronoss' financial projections relied upon by Plaintiffs were reduced to dollars and cents, and had not a shred of reference to the iPhone 3G. And while it was indeed Plaintiffs' right to tease their fancy and construe any Synchronoss' statement having the phrase "Apple iPhone" as referring to all generations of the iPhone or to the iPhone 3G, or to hypothesize that Synchronoss' financial projections had to factor in the receipts from off-site activation of the iPhone 3G, Plaintiffs do not state any statutory or regulatory provision, or case law (and this Court, on its own, is aware of none) making Defendants liable for Plaintiffs' flights of imagination or for Plaintiffs' self-serving constructions of Defendants' language, or Plaintiffs' overly optimistic hypotheses as to the strategies of Apple/AT&T, or for Plaintiffs' guesswork as to why Irving arrived at the figures stated, just as Plaintiffs do not enlighten this Court about any provision or case law rendering Defendants liable for the tides and ebbs of rumors that allow various unrelated-to-Defendants journalists and analysts to exercise their ability to read the financial crystal ball. Compare Raab, 4 F.3d at 288 (unambiguously clarifying that the defendant cannot be held liable for statements of unrelated third parties, even if these third parties attribute their opinions to the statements made by the defendant).

Simply put, Plaintiffs invite this Court to find the Rule 9 / PSLRA degree of falsity in those statements of Defendants that did not even mention the alleged object of falsity. The Court declines the invitation. Stripped of all niceties, Plaintiffs' assertions as to Defendants' allegedly false projections with regard to Synchronoss' upcoming off-site activation of the iPhone 3G succeed in alleging nothing more than Plaintiffs' bare disappointment with the fact that Plaintiffs' financial hopes (and the projections of the journalists and analysts whom Plaintiffs wanted to believe) turned out false. However, the law of securities does not equate the falsity of Plaintiffs' projections (or the falsity of projections made by the press not associated with Defendants) with the falsity of Defendants' projections. Therefore, Plaintiffs' allegations as to Defendants' allegedly false future projections asserting that Synchronoss would be involved in and get revenue from off-site activation of the iPhone 3G will be dismissed.

b. Future Projections Allegedly Related to "Unlocking"

i. "False Failure to Project" as a Cause of Action

Left unaddressed in the discussion provided above are Plaintiffs' assertions that Defendants are liable to Plaintiffs by "not projecting otherwise," i.e., by not making projections different from the iPhone 3G-related rumors -- or from Plaintiffs' own iPhone 3G-related beliefs -- as to Synchronoss' future.

It appears from the arguments stated in the Complaint and Plaintiffs' Opposition Brief that Plaintiffs are of opinion that a securities defendant might be liable for failing to make a certain forward-looking projection. If so, Plaintiffs err. As the pages of this Court's extensive discussion of substantive law clarified, a securities defendant -- under certain circumstances -- might be liable for either: (a) the falsity of its statements about the current/past state of affairs; or (b) a failure to correct its prior statements about the current/past state of affairs; or (c) the falsity of actually made future projections. The law of securities, however, does not recognize liability for "false failure to predict": such hybrid cause of action interjecting the liability based on an omission into the liability for false forward-looking statements is simply not cognizable.*fn51

Here, however, Plaintiffs' claim exactly that, i.e., that Defendants somehow failed to predict that the iPhone 3G would not be offered for off-site activation and, thus, Synchronoss might not get revenue from Apple/AT&T's launch of the iPhone 3G. This shortcoming appears even more pronounced in Plaintiffs' claims that Defendants failed to predict -- and, thus, failed to factor in --the potential negative effect of "unlocking." Unadorned by rhetoric, this claim simply blames Defendants for inability to be clairvoyant about one of the infinite number of scenarios under which Synchronoss would not derive the revenue it was hoping to derive. However, since it is well established that "[securities] 'law does not expect clairvoyance,'" IKON Office Solutions, Inc., 277 F.3d at 673; see also Denny, 576 F.2d at 470 (same), i.e., the law of securities knows no liability for "false failure to predict," Plaintiffs' claims based on Defendants' inability to predict a potential negative effect of "unlocking" will be dismissed (same as Plaintiffs' claims asserting that Defendants violated the law by not predicting the possibility of Synchronoss' exclusion from activation of the iPhone 3G).

ii. Insufficiency of Pleadings

Moreover, even if the Court were to ignore Plaintiffs' reliance on their above-described hybrid "cause of action," Plaintiffs' allegations based on Defendants' alleged failure to predict (and, thus, to factor in) a potential negative effect of "unlocking" would still have to be dismissed.

The threshold shortcoming of this particular claim is that it is facially sophistic, since it asserts a factless premise that the problem of "unlocking" actually was the sole (or predominant) cause for the drop in Synchronoss' revenue in order to: (a) simultaneously -- but factlessly -- assert that Defendants were able to guess this still-to-be-established negative financial impact of "unlocking," and that Defendants could do it months in advance; and, then (b) to conclude that Defendants either intentionally avoided making such prediction or actually guessed this negative financial impact of "unlocking" correctly but refused to share their guess with the investing public.

However, a multitude of business variables other than the problem of "unlocking" could have affected the revenue Synchronoss was deriving from off-site activations of the iPhone. For instance, the reduction in per-activation compensation (which, as the record demonstrates, came into being after the initial "high-compensation-per-activation" period ended) could very well lead to such decline in revenue, even if the number of Synchronoss' off-site activations of iPhones remained the same or even increased. Or, for example, a swift saturation of the iPhone market (which, according to Plaintiffs' assertions, was promptly tied by two-year contracts and, thus, ceased purchasing new iPhones) and the following slow trickling-in of new iPhone consumers (who, e.g., purchased their iPhones because of the price reduction) could be the reason for an overall decline in iPhone activations and for the ensuing decline in Synchronoss' revenue from off-site share of these activations. Alternatively, the difference in mentality and high-tech propensity between the initial purchasers and the later purchasers could, just as well, cause a reduction in off-site activations (and upswing of in-store activations), thus yielding a drop in Synchronoss' revenue.*fn52

Plaintiffs, however, ask the Court to adopt Plaintiffs' factless conclusion that the decline in Synchronoss' revenue derived from off-site activation of the iPhone was caused solely, or predominantly, by the problem of "unlocking," and expect the Court to find that these factless allegations show that Defendants somehow knew of -- but intentionally omitted to forecast -- this purely hypothetical negative impact. The Court cannot make this finding, since such holding would be unwarranted even under the more lenient pleading requirements of Rule 8. See Fowler, 578 F.3d at 210-11 (quoting Iqbal, 129 S.Ct. at 1949-50, and stating that "'[w]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not 'show[n]'-'that the pleader is entitled to relief.' This 'plausibility' determination will be 'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense'") (emphasis supplied). A fortiori, Plaintiffs' allegations cannot pass muster under the heightened pleading requirements posed by the PLRA and Rule 9. Therefore, this line of Plaintiffs' allegations will be dismissed.

iii. Substantive Insufficiency of the Claim

Even if this Court would go one step further and -- upon ignoring Plaintiffs' apparent preoccupation with the problem of "unlocking" as the sole/predominant cause for the decline in Synchronoss' revenue derived from off-site activations of the iPhone -- would simply read Plaintiffs' claim as asserting that Defendants' overall financial projections were false, Plaintiffs' claim would, nonetheless, have to be dismissed.

In addition to generic optimistic statements made by Walsis and Irving on February 4, 2008 (which, as this Court already pointed out, constituted nothing but puffery that could not result in legal liability), Defendants issued three sufficiently precise financial statements: (a) one through Irving, during the February 4, 2008, earnings call ("Earnings Call Statement"); (b) another one through the press release ("Press Release") published on the same day; and (c) one by filing their February 29, 2008, 10-K Report ("Report").*fn53

Specifically, the Earnings Call Statement forecasted Synchronoss first-quarter-of-2008 revenue at $30 to 32 million, and the same figures were repeated in the Press Release and Report. However, on May 6, 2008, Synchronoss reported net revenue of $29.1 million for the first quarter of 2008, thus missing its low-bar projection of $30 million by $0.9 million, that is, by 3%.*fn54

Plaintiffs assert that the Earnings Call Statement, Press Release and Report presented false forward-looking statements. This Court disagrees.

First of all, Plaintiffs fail to allege any facts suggesting "strong inference" of Defendants' scienter. Indeed, the 3% difference between the projected quarterly result and that actually achieved cannot be read as evidencing scienter.*fn55 See IKON Office Solutions, Inc., 277 F.3d at 673; Denny, 576 F.2d at 470; see also DiLeo, 901 F.2d at 627 ("[P]roffer[ing a] different financial statement [is not sufficient.] Investors must point to some facts suggesting that the difference is attributable to fraud"); Harris v. IVAX Corp, 998 F. Supp. at 1455 ("Plaintiff[']s attempt simply to hold up the Defendants' predictions against the backdrop of what actually happened" is insufficient to establish scienter); accord Chubb, 394 F.3d at 158 (the Third Circuit has "long rejected attempts to plead fraud by hindsight"); Wielgos, 892 F.2d at 514("If all estimates are made carefully and honestly, half will turn out too favorable to the firm and the other half too pessimistic. In either case, the difference may disappoint investors, who can say later that they bought for too much [if the projection was too optimistic,] or sold for too little, [if the projection was too pessimistic].... [T]he firm is not liable despite error"); Grossman, 120 F.3d at 1124 (10th Cir. 1997) ("[I]t is clearly insufficient for plaintiffs to say that the later, sobering revelations make the earlier, cheerier statement a falsehood").

Similarly, Plaintiffs' assertion that Waldis and Irving profited from sale of their Synchronoss shares provides Plaintiffs' scienter allegations with an insufficient support, especially in light of the facts that: (a) the trades at issue were made pursuant to Waldis and Irving's pre-disclosed trading plans; and (b) it is natural for any trader of securities, including insiders, to try to sell their shares at maximum profit.*fn56 See Rothman, 220 F.3d 81($1.6 million dollar profit from inside trading was not sufficiently unusual to provide an inference of scienter); see also GSC Partners CDO Fund, 368 F.3d at 237 ("Motives that are generally possessed by most corporate directors and officers do not suffice"). And -- since none of the Plaintiffs' facts suggests "strong inference" of Defendants' scienter with regard to Synchronoss' financial projections -- Defendants' Earnings Call Statement, Press Release and Report qualify for protection under the safe harbor provision.

Moreover, even if this Court were to hypothesize that Plaintiffs' somehow omitted to include in their extensive Complaint facts suggesting "strong inference" of Defendants' scienter for the purposes of the claims based on Synchronoss' financial forward-looking statements, Plaintiffs' claims would still have to be dismissed under the first prong of the safe harbor provision insulating Defendants' Earnings Call Statement, Press Release and Report from liability as projections accompanied by sufficient cautionary language.*fn57

While Plaintiffs concede that all Defendants' financial projections included risk-alerting statements, Plaintiffs nonetheless assert that all these cautionary warnings should not insulate Defendants from liability, since Defendants' cautionary language is, allegedly, insufficient.*fn58 Specifically, Plaintiffs maintain that: (a) the risk-alerting language was insufficient because it was not expressly warning the investors that it was addressed to forward-looking statements, and because the terminology used was "too boilerplate"; and (b) the incorporated-by-reference risk-alerting language contained in Synchronoss' prior filings dealt with the range of risks which Plaintiffs read as risks different from the one that Plaintiffs deemed as the risk that actually occurred.*fn59 See Dismissal Opp., at 25.

Both Plaintiffs' arguments are invalid. With regard to Plaintiffs' first argument, the Court agrees with Defendants that Plaintiffs' position is factually unfounded, since the risk-alerting language used in the Earnings Call Statement, Press Release and Report expressly: (a) notified the investors that Defendants were making forward-looking statements, see note 57 (quoting the relevant language, short of the pages and pages of the cautions included in the Report);*fn60 and (b) provided the audience with not just "boilerplate" discussions but also with incorporated-by-reference extensive risk discussions made in Synchronoss' other filings made with the SEC. See Institutional Investors Group v. Avaya, Inc., 564 F.3d 242, 257 (3d Cir. 2009) (generic cautionary language is sufficient if it incorporates by reference the risks discussed in the defendant's other filings); In re Merck& Co., Inc. Sec. Litig., 432 F.3d 261, 273 n.11 (3d Cir. 2005) (same); In re Party City Sec. Litig., 147 F. Supp. 2d 282, 309-10 (D.N.J. 2001) (same).

The Court similarly finds Plaintiffs' second argument without merit, although for reasons different to those advocated by Defendants. Defendants' maintain that their incorporated-by-reference risk discussions were necessarily sufficient -- even if the Earnings Call Statement and Press Release did not specify which particular SEC filings Defendants were referred to -- because all Syncronoss' filings with the SEC contained extensive discussions of multiple risks, comparable to pages and pages of such discussion provided in the Report. See Dismissal Reply, at 6-7.*fn61 Although the Court agrees with Defendants' factual and legal points, the Court, however, construes Plaintiffs' challenge as asserting that none of Defendants' filings informed the investors about the possibility that Synchronoss' revenue might drop. See Dismissal Opp., at 25. Such construction allows for:

(a) a reading of Plaintiffs' challenge to the incorporated-by-reference cautionary language as a challenge based on a "general" decline of Synchronoss' revenue (that is, if this Court employs the presumption stated at the beginning of this subsection, i.e., that Plaintiffs inadvertently focused on "unlocking" as the sole cause for decline in Synchronoss revenue, while Plaintiffs actually wished to assert that Defendants' overall financial projections were false); or

(b) a reading of Plaintiffs' challenge to the incorporated-by-reference cautionary language as a challenge based on the decline of Synchronoss' revenue solely (or predominantly) as a result of the problem of "unlocking."

Regardless of whether the Court adopts the first or the second reading, Plaintiffs' position is without merit. In the "general substantial decline" scenario described in paragraph "(a)," supra, Plaintiffs' challenges should be construed as asserting that Defendants "boilerplate" and incorporated-by-reference language did not address the multiple general risks, which is factually incorrect. See, e.g., Docket Entry No. 30-3, at 16-23 (replicating Defendants' Report which extensively details many risks, although not the hypothetical "risk of the problem of unlocking"). Alternatively, in the substantial-decline-only/mainly-as-a-result-unlocking scenario described in paragraph "(b)," Plaintiffs' arguments fail for the reasons detailed by this Court in the subsection titled "Insufficiency of Pleadings," that is, for being both a factless and a sophistic claim.*fn62 Thus, Plaintiffs' allegations based on the alleged falsity of Defendants' forward-looking statements as to Synchronoss' future revenue fail to state a claim, and will be dismissed.

4. Claims Based on Defendants' Alleged Omissions

As this Court already explained, not every statement containing an "omission," i.e., a statement omitting to disclose information about current or past facts, qualifies as a "misleading statement" and entails liability under Rule 10b-5. See Basic, 485 U.S. at 239 n.17; Winer, 503 F.3d at 329; Burlington, 114 F.3d at 1432. Rather, the duty to disclose arises only if: (a) a statute requires disclosure; or (b) the omission is accompanied by insider trading; or (c) there is/was an inaccurate, incomplete or misleading disclosure by the defendant. See Oran, 226 F.3d at 286-87 (citing, inter alia, Glazer, 964 F.2d 149, and General Motors, 694 F. Supp. 1119); Winer, 503 F.3d at 329.

The scenario defined in paragraph "(a)" does not seem to be at issue in this matter, since Plaintiffs do not assert that there was/is an underlying provision expressly mandating Defendants to perform disclosure of the particular facts allegedly concealed, and the Court is not aware of any provision so mandating."*fn63 Hence, Plaintiffs' claims alleging undue omissions by Defendants must, necessarily, be brought under either "(b)" or "(c)" scenarios.

Speaking of the duty to disclose under the "(b)" scenario, the court in SEC. v Texas Gulf Sulphur Co., 258 F. Supp. 262 (S.D.N.Y. 1966), aff's in part and rev'd in part on other grounds, 401 F.2d 833 (2d Cir. 1968), pointed out that it is obvious that any director, officer, or employee of a corporation might -- and almost certainly will -- know more about his company or have more specialized knowledge as to at least some phase of its business than an outside investor can have or be expected to have. See id. at 280. Consequently, a general proposition that all trades by insiders automatically give rise to duty to disclose (or, upon non-disclosure, give rise to a violation of Rule 10b-5) was expressly rejected in Schoenbaum v Firstbrook, 268 F. Supp. 385 (S.D.N.Y. 1967), aff'd 405 F.2d 200, rev'd en banc on other grounds, 405 F.2d 215 (2d Cir. 1968), where the court observed that such a principle would be contrary to both normal business practices and the logic of the Rule's admonition.*fn64 See id. at 395. Rather, a duty to disclose arises when a corporate insider trades on a confidential material information, which is both true and known to the insider, see Glazer, 964 F.2d at 156-57 (citing Backman, 910 F.2d at 12, which -- in turn -- relied on Roeder v. Alpha Indus., Inc., 814 F.2d 22 (1st Cir. 1987), that is, the case where an insider traded on a true and undisputably known-to-the-insider information of corporate bribery, since the insider was involved in that very bribery and, eventually, criminally charged), or -- at the very least -- when the insider's trades at issue are so heavily laden with suspicious circumstances that they suggest trades based on an abuse of confidential material information. See Oran, 226 F.3d at 288-89.

Finally, in the "(c)" scenario, that is, in the situation where the defendant's omission entails liability as a result of the duty to correct/update a prior statement, the court invariably begin their analyses by noting that, at the outset, there is an initial duty on the part of the defendant to state accurate information. See Roeder, 814 F.2d at 26 (citing Texas Gulf Sulphur, 401 F.2d at 860-61, and Grossman v. Waste Management, Inc., 589 F. Supp. 395, 409 (N.D. Ill. 1984)). This observation ensues from Rule 10b-5(b)'s prohibition as to the omissions of those material facts, which are "necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading." 17 C.F.R. § 240.10b-5(b). Thus, the defendant cannot make a statement so incomplete as to render the statement, as a whole, misleading. See Texas Gulf Sulphur, 401 F.2d at 862; see also Miss. Pub. Emples. Ret. Sys. v. Boston Sci. Corp., 523 F.3d 75, 85 (1st Cir. 2008) (citing Bielski v. Cabletron Sys., 311 F.3d 11, 36 (1st Cir. 2002)).

Then, as the next step, the defendant may also have a duty: (a) to verify/deny rumors about the defendant's operations, but only in the event these rumors were introduced into the marketplace by the defendant or defendant's agents, see General Motors, 694 F. Supp. at 1129 (citing State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 850 (2d Cir. 1981)); or (b) to correct/update its own prior statement, but only if that prior statement was either false when made or was true when made but became misleading (as a result of intervening events) while it still remained operable. See Overton v. Todman & Co., 478 F.3d 479, 487-88 (2d Cir. N.Y. 2007); Bielski, 311 F.3d 11.

a. Lack of Duty to Disclose Ensuing from Waldis and Irving's Trades

Plaintiffs' Complaint does not articulate any facts verifying that Walsis and Irving traded on confidential material information (be it related to the iPhone 3G or to the problem of "unlocking") which is shown to be true and known; rather the Complaint factlessly concludesthat such confidential information was in existence and known to Defendants. Consequently, Plaintiffs' argument is facially circular, in the sense that it is first asking the Court to accept Plaintiffs' self-serving conclusions that some events were actually true, and then that these hypothetical events became known to Defendants as confidential information, and motivated their trades. As such, Plaintiffs' argument cannot pass muster even under the more lenient standard of Rule 8, as interpreted in Twombly and Iqbal, and it certainly falls short of the steep pleading requirements set forth by Rule 9 and the PSLRA.

It follows that Plaintiffs' argument could be based only on facts evincing circumstances so suspicious/anomalous as to suggest that Defendants' trades during the Class Period were made on the basis of confidential material information. Plaintiffs, however, fail to so allege. Indeed, as Defendants duly point out, Plaintiffs do not dispute that Waldis and Irving were trading during the February to May, 2008, period under Defendants' trading plans, and -- under the very same plans --Defendants were similarly selling their Synchronoss stock prior to and after the Class Period. The sole factual point which this Court could identify offered in support of Plaintiffs' position is Plaintiffs' reference to the exchange of letters between the SEC and Waldis/Synchronoss. However, this reference suffers from both procedural and substantive shortcomings and, consequently, cannot lend support to Plaintiffs' position.

First, as Defendants correctly observe, Plaintiffs' reference to the SEC letter was made in Plaintiffs' Dismissal Opposition, and -- regardless of its merits -- cannot qualify as a pled fact. See Dismissal Reply at 11-12 (citing Commw. of Pa. ex. rel Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 181 (3d Cir.1988), for the proposition "[i]t is axiomatic that the complaint may not be amended by the briefs in opposition to a motion to dismiss") (internal citation omitted). Second, [in] that letter..., the SEC had inquired as to why Synchronoss did not include in Synchronoss's [May 6, 2008] Form 10-Q [a statement expressing Defendants' opinion] that the gap between the number of iPhones sold and the number activated by Synchronoss would increase [even though Defendants] contemporaneously disclosed that very same information verbally [during the May 6, 2008,] earnings... call.

Dismissal Reply (basing this statement on the content of Plaintiffs' exhibit attached to the Dismissal Opposition, which replicated the SEC letter and was docketed in this matter as Docket Entry No. 26-4).

Since the content of the SEC letter neither details any facts about -- nor even suggests the presence of -- any trading abnormalities by Waldis or Irving, the SEC letter lends no factual support to Plaintiffs' position. It follows that those allegations which Plaintiffs articulated in their Complaint on the basis of Waldis and/or Irving's trades in Synchronoss common stock must be dismissed.

b. Allegations as to Omissions and/or Duty to Correct or Update

As the foregoing discussion illustrates, Plaintiffs' omission-based allegations cannot be brought on the grounds of either insider trades or the underlying mandate directing disclosure in light of Plaintiffs' failure to assert any fact in support of such contentions, which, in turn, leaves Plaintiffs with only the opportunity to state facts asserting that there was a disclosure by Defendants, which was either so incomplete ab initio as to qualify as misleading or which was not updated in a timely fashion.*fn65 Since both of these options might apply to each of Plaintiffs' two groups of claims (the iPhone 3G group of claims and the "unlocking" group of claims), and the Court addresses the resulting alternatives seriatim.

i. Omissions as to the iPhone 3G

Plaintiffs' "omission"-based group of allegations seems to suggest that, either prior to the beginning of the Class Period or, perhaps, sometime during the Class Period, Defendants: (a) came to know, for a fact, that Synchronoss would not be involved in off-site activation of the iPhone 3G; but (b) either omitted to disclose this fact to the investing public ab initio or failed to update their prior disclosure when the circumstances changed. In support of such assertions, Plaintiffs rely on: (a) the fact that Synchronoss made its announcement as to its non-involvement in the iPhone 3G on the day following Apple/AT&T's announcement to that effect; and (b) statements of Plaintiffs' undisclosed witnesses.*fn66

As the Court already detailed in the subsection titled "Allegations Related to the iPhone 3G," the statements of Plaintiffs' undisclosed witnesses: (a) allege, as a fact, that, sometimes during the January-to-March of 2008 period, Synchronoss laid off certain permanent employees, some of whom were high-positioned managerial and/or technical staff ("Workforce Fact"); and (b) state an inadmissible quasi-expert opinion ("Quasi-expert Opinion") asserting that (i) Synchronoss would be unable to perform the task of off-site activation of the iPhone 3G without creating a software different from that used for off-site activation of the original iPhone, plus (ii) the task of creating such new software would be virtually insurmountable without the particular employees who were laid off (even with alternative help from temporary or substitute hires).*fn67 From the foregoing Workforce Fact and Quasi-expert Opinion, Plaintiffs deduce Defendants' concealment of another presumed fact, i.e., that Defendants knew that Synchronoss would not be involved in off-site activation of the iPhone 3G. In other words, Plaintiffs offer this Court not facts but multiple layers of their self-serving conjecture.

Indeed, the fact that Synchronoss disclosed its non-involvement in off-site activation of the iPhone 3G on the day following Apple/AT&T's announcement in no way indicates that Defendants knew about Apple/AT&T's decision prior to that Apple/AT&T announcement: rather, this fact appears indicative of a scenario where -- until the very day when Apple/AT&T made its final decision and announcement -- Synchronoss was hoping to be involved in off-site activation of the iPhone 3G as a result of the statements from Apple/AT&T that vaguely suggested continuous utilization of Synchronoss' software.*fn68 Consequently, Plaintiffs' self-serving conjecture based on the timing of Synchronoss' disclosure cannot qualify as even a plausible claim under Rule 8, as explained in Iqbal, and it certainly cannot meet the pleading requirements of the PSLRA/Rule 9.

Plaintiffs' allegations based on the fact that Synchronoss was laying off personnel during the January-to-March of 2008 period fare even worse, since an infinite number of reasons unrelated to the iPhone 3G (e.g., the undisputed decline in Synchronoss' revenue starting from the beginning of 2008, the overall decline in the nation's economy that resulted in a recession half-a-year later, the tendency of the IT industry, as a whole, to lay off permanent staff in order to outsource work from the United States and/or to employ IT specialists on temporary basis, etc.) or a combination of such reasons could yield an identical result, i.e., the very same reduction in Synchronoss' workforce and/or terminations of permanent staff. Consequently, the fact of the alleged lay-offs cannot sustain Plaintiffs' claims under the Rule 9 and PSLRA pleading standards.*fn69

Granted the foregoing, the Complaint leaves the Court with no relevant factual allegations showing that, either prior to the beginning of the Class Period or sometimes during the Class Period, Defendants knew what they allegedly omitted to disclose. Yet, Plaintiffs maintain that all Defendants' statements issued during the Class Period were so incomplete that the result of this non-disclosure that Defendants' statements should qualify as misleading. Attempting to somehow reconcile such Plaintiffs' position with the governing legal regime, the Court presumes that Plaintiffs aimed to assert that Defendants' statements discussing of the original iPhone, being unaccompanied by Defendants' express statements about Synchronoss' hopes (and uncertainties) as to its potential involvement in the iPhone 3G, should qualify as an "omissions" rendering Defendants' statements misleading within the meaning of securities law.

If so, Plaintiffs' allegations fail to state a claim, perhaps because of Plaintiffs' misconstruction of the meaning of the term "misleading." The term "misleading" has an "ascertainable meaning appreciated by ordinary people," United States CFTC v. Reed, 481 F. Supp. 2d 1190, 1199 (D. Colo. 2007), since an expression that a piece of information or a statement is "misleading" indicates nothing more and nothing less than that the statement "tend[s] to mislead, [i.e.,] to lead in a wrong direction." See Webster's Third New Int'l Dictionary 1444 (1986) (emphasis supplied). Consequently, it is not enough to allege that the statement is incomplete; rather, the plaintiff must state facts showing that, due to its incompleteness, the statement affirmatively led the plaintiff in a wrong direction (rather than merely omitted to discuss certain matters). See Brody v. Transitional Hospitals Corp., 280 F.3d 997, 1006 (9th Cir. 2002)) ("Rule 10b-5... prohibit[s] only misleading and untrue statements, not statements that are incomplete. Often, a statement will not mislead even if it is incomplete or does not include all relevant facts"). In Winer, 503 F.3d 319, the Court of Appeals: (a) illustrated this proposition by reminding that "the duty to disclose rule does not mean that by revealing one fact about a product, one must reveal all others that, too, would be interesting, market-wise, but means only such others, if any, that are needed so that what was revealed would not be so 'incomplete as to mislead," id. at 330 (citation and brackets omitted): (b) clarified that non-disclosure of the defendant's past and future business relationships does not render the defendant's statement so incomplete as to be misleading, see id. at 329-30, accord Backman, 910 F.2d at 16 (failure to discuss details of business operation and operational capacity does not amount to an omission substantial enough to misled); and (c) stressed that the burden of factual assertion establishing such "misleading type" of incompleteness rests with the plaintiff. See Winer 503 F.3d at 330; accord 15 U.S.C. § 78u-4(b)(1).

Here, Plaintiffs' Complaint fails to point out a single statement that affirmatively led Plaintiffs in a wrong direction. The only allegations the Court could locate in the Complaint are: (a) Plaintiffs' systemic discussions of Synchronoss' usage of the term "Apple iPhone" in Synchronoss' statements (without the seemingly-preferred-by-Plaintiffs clarification, "the original version of Apple iPhone only"); and (b) Plaintiffs' observation that Defendants kept expressing pride in Synchronoss' business achievements and successful performance of ConvergenceNow. However, none of these allegations states facts showing any wrongfulness of Defendants' statements, be these statements examined as a whole or in pieces.*fn70 All that Plaintiffs' allegations suggest is the wrongfulness of Plaintiffs' interpretation of the issues wholly unrelated to the content of Defendants' challenged statements. However, since the meaning of the term "misleading" does not turn on the issues unrelated to Defendants' statements, Plaintiffs' allegations that Defendants' statements were misleading ab initio (and, thus, subject to immediate correction) will be dismissed.*fn71 See Burlington, 114 F.3d at 1432 ("[A] corporation is not required to disclose a fact merely because a reasonable investor would very much like to know that fact. [Management's] possession of material nonpublic information alone does not create a duty to disclose it"); Milton, 961 F.2d 965 (failure to disclose plans by a cluster of corporations to begin producing a product that would negative affect the market for another product being produced by the same cluster of corporations is not a violation of securities law); see also Winer, 503 F.3d 319; Backman, 910 F.2d 10; Brody, 280 F.3d 997.

Plaintiffs' allegations that Defendants violated the law by omitting to update their prior statements through a disclosure contradicting the rumors (which, allegedly, filled the market confabulating that Synchronoss would be involved in off-site activation of the iPhone 3G) similarly fail to state a claim. This is so simply because the duty to deny or verify rumors could arise only if Defendants themselves affirmatively introduced these rumors into the market, see General Motors, 694 F. Supp. at 1129, but -- here -- Plaintiffs fail to allege any fact so suggesting. Finally, Plaintiffs fail to assert any facts suggesting that Defendants had a generic duty to update their prior statements when Defendants became allegedly aware about Synchronoss' non-involvement in off-site activation of the iPhone: this is so because none of Defendants statements required such an "update," since none of Defendants' statements -- be it issued prior to or during the Class Period -- even mentioned the iPhone 3G (and, hence, there was no statement to update). In sum, since the Complaint fails to allege facts showing that Defendants' statements were either misleading when made or that these statements were such that a change in circumstances gave rise to Defendants' duty to update these statements, Plaintiffs' allegations based on Defendants' alleged omissions as to the iPhone 3G issue will be dismissed.

ii. Omissions as to the Change in Synchronoss' Revenue

The final line of Plaintiffs' allegations deals with the revenue Synchronoss was deriving from its off-site activations of the original iPhone. As with Plaintiffs' claims based on Defendants' forward-looking statements concerning the original iPhone, the group of challenges at hand could be read through the prism of either: (a) Plaintiffs' seeming preoccupation with the hypothetical predominant impact the process of "unlocking" could have been taking on Synchronoss' revenue; or (b) those few factual assertions that suggest Plaintiffs' more general approach, i.e., the allegations intimating a claim that Defendants misled -- or failed to update -- the investors about the overall decline in the revenue Synchronoss was deriving from the original iPhone.

Read through the prism of Plaintiffs' emphasis on the problem of "unlocking" as the sole/predominant cause for the decline in Synchronoss' revenue, Plaintiffs' allegations fail to state a claim. The shortcomings of these allegations effectively repeat all Plaintiffs' errors tainting Plaintiffs' challenges based on Defendants' forward-looking statements as to Synchronoss' revenue, and -- in addition -- repeat all the errors made with regard to Plaintiffs' challenges based on Defendants' alleged omissions with regard to the iPhone 3G.

Specifically, Plaintiffs' allegations start off with Plaintiffs' conjecture that the problem of "unlocking" -- rather than any other problem or a combination of other problems -- was the sole or predominant cause for the decline in Synchronoss' revenue. After that, Plaintiffs' continue hypothesizing that the problem of "unlocking" was known to Defendant. As a final step, Plaintiffs assert that Defendants' statements were misleading because Defendants omitted to disclose this hypothetical knowledge to the investors. These exponentially hypothetical allegations, however, cannot state a claim under the requirements of the PSLRA and Rule 9 -- a legal "adjudication cannot rest on any such 'house that Jack built' foundation." Salyer Land Co. v. Tulare Lake Basin Water Storage Dist., 410 U.S. 719, 731 (1973).

In addition -- similar to Plaintiffs' allegations based on alleged Defendants' omissions as to the iPhone 3G -- Plaintiffs' claims (asserting that Defendants' statements as to the original iPhone were misleading either because of Defendants' initial concealment of the problem of "unlocking" or became misleading while operable due to failure to update) fail to point out to any Defendants' statement that could have been leading its audience in a wrong direction or even made any reference to the presence -- or absence -- of the problem of "unlocking." Consequently, Plaintiffs' allegations based on the decline in Synchronoss' revenue, which focus on the problem of "unlocking," fail to state a claim and will be dismissed accordingly.

The same, however, might not necessarily be true with regard to those Plaintiffs' facts which loosely sketch a vague claim based on the overall decline of revenue Synchronoss was deriving from its off-site activations of the original iPhone. While articulates with the least degree of clarify -and, perhaps, exactly because of being articulates with such little clarify -- this claim does not appear based on merely exponential layers of Plaintiffs' self-serving conjecture. For instance, Plaintiffs assert two seemingly relevant facts, namely, that: (a) Synchronoss' revenue from off-site activations of the original iPhone declined sometimes in January of 2008, and the same lower iPhone-related revenue continued throughout the first reporting quarter of 2008 (and, apparently, the remainder of the year); and (b) sometimes after the end of February 2008, Defendants digested Synchronoss' financial results for January/February of 2008 and recognized that the lower iPhone-related revenue of January and February 2008 was a sign of a systemic trend rather than a mere "market fluke," and that this very realization caused Walsis to characterize this trend-setting change as "the surprise [Synchronoss received] in January and February."*fn72

It is self-evident that, in the event Defendants knew or should have known about this trend-setting change only on May 5, 2008, Defendants could not commit any violation of securities law, since they issued a statement informing the investing public about the trend on May 6, 2008. Conversely, had Plaintiffs alleged facts ("Duty to Update Facts") showing that the business/accounting operations of Synchronoss were such that Defendants knew or should have known about the financial performance achieved by Synchronoss in January and February of 2008 sometimes prior to May 5, 2008, such allegations might suggest that Defendants violated the law by failing to update still operable prior statements. However, while the Court cannot exclude the possibility that Plaintiffs wished to articulate such Duty to Update Facts, Plaintiffs' convoluted Complaint sets Plaintiffs' facts in such a fashion that the Court cannot discern which facts, if any, were intended to be these Duty to Update Facts. Similarly, the Complaint does not clarify which particular Defendants' prior statements, if any, Plaintiffs deem to be both operable after the end of February 2008 and containing the information that requiring an update about the new trend in revenue. Furthermore, Plaintiffs fail to specify which particular facts stated in the Complaint might be indicative of Defendants' scienter for the purposes of such failure-to-update claim.*fn73 In sum, Plaintiffs' allegations merely "hint" at a claim, rather than state a claim, and shall be dismissed. See Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 347 (2005) ("it should not prove burdensome for a plaintiff... to provide... some indication of the [facts] that the plaintiff has in mind"); accord Kaplan v. United States Office of Thrift Supervision, 104 F.3d 417, 423 (U.S. App. D.C. 1997) (allegations that the defendant should have, somehow, surmised that "something was rotten in the state of Denmark" are insufficient).

C. Leave to Amend

Having thoroughly examined all Plaintiffs' allegations and finding that each of these challenges is not supported by properly pled facts, this Court now turns to the question of whether Plaintiffs shall be allowed to replead their claims.

Ordinarily, dismissal based on failure to plead fraud with particularity under Rule 9 is without prejudice to a plaintiff's filing an amended complaint to cure the deficient pleading since, under Federal Rule of Civil Procedure 15(a), the plaintiff may be granted "leave [to amend,]... when justice so requires." See Foman v. Davis, 371 U.S. 178, 182 (1962); Lorenz v. CSX Corp., 1 F.3d 1406, 1414 (3d Cir. 1993). However, "[a]llowing leave to amend where 'there is a stark absence of any suggestion by the plaintiffs that they have developed any facts since the action was commenced, which would, if true, cure the defects in the pleadings under the heightened requirements of the PSLRA,' would frustrate Congress's objective in enacting this statute of 'provid[ing] a filter at the earliest stage (the pleading stage) to screen out lawsuits that have no factual basis.'"*fn74 Chubb, 394 F.3d at 164 (quoting GSC Partners CDO Fund, 368 F.3d at 246); see Cybershop.com Sec. Litig., 189 F. Supp. 2d at 237 ("[T]he Reform Act would be 'meaningless' if judges liberally granted leave to amend on a limitless basis") (citing Champion Enter., Inc., Sec. Litig., 145 F. Supp. 2d 871, 872 (E.D. Mich. 2001)).

That being said, the Court is mindful of the Supreme Court's teaching that "[t]he Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits," Foman, 371 U.S. at 180 (citation and internal quotation marks omitted), as well as of the Court of Appeals' strong policy in favor of allowing amendments in order to ensure that claims will be decided on the merits rather than on technicalities. See Dole v. Arco Chem. Co., 921 F.2d 484, 487 (3d Cir. 1990); Bechtel v. Robinson, 886 F.2d 644, 652 (3d Cir. 1989).

The Complaint at hand presents the Court with a hard choice. A forty-one page submission encompassing 113 paragraphs, the Complaint at hand has amended its 29-page 100-paragraph predecessor and represents Plaintiffs' efforts after almost eleven months of litigation. Yet, short of its least articulated claim challenging, seemingly, Defendants' failure to update some statements by disclosure of a new trend in Synchronoss' revenue derived from activations of the original iPhone, the Complaint provides the Court with a web of claims based not on fact but on exponential layers of Plaintiffs' self-serving conjecture read through erroneous legal standards. In sum, the content of the Complaint, assessed through the procedural posture of this matter, come dangerously close to indicating "a stark absence of any suggestion [that] plaintiffs [may] develop[] any facts [to] cure the defects [of their] pleadings [to meet] the heightened requirements of the PSLRA." Chubb, 394 F.3d at 164.

However, weighing the insufficiencies of the pleadings at bar against the possibility that the ambiguities of the Complaint might, nonetheless, be indicative of Plaintiffs' ability to cure the shortcomings of their Complaint, the Court finds it prudent to allow Plaintiffs an opportunity to re-amend their pleadings.*fn75 Consequently, Plaintiffs' allegations against Synchronoss will be dismissed without prejudice. Plaintiffs' derivative Section 20(a) allegations against Waldis and Irving will be similarly dismissed without prejudice.

V. CONCLUSION

For the foregoing reasons, Plaintiffs' Motion to Strike, Docket Entry No. 27, will be denied, without prejudice, as premature. Defendants' Motion to Dismiss, Docket Entry No. 24, will be granted, and Plaintiffs' Amended Complaint, Docket Entry No. 22, will be dismissed, without prejudice, for failure to state a claim upon which relief can be granted. This matter will be administratively terminated subject to reopening in the event Plaintiffs timely file their re-amended complaint.

An appropriate Order accompanies this Opinion.

GARRETT E. BROWN, JR. Chief Judge United States District Court


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