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As a general matter, a district court ruling on a motion to dismiss may not consider matters extraneous to the pleadings. However, an exception to the general rule is that a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary judgment.
Burlington Coat Factory Warehouse Corporation ("BCF "), a Delaware corporation based in New Jersey, announced its fourth quarter and full fiscal year results for 1994 on September 20, 1994. The results were below the investment community's expectations, and BCF's common stock fell sharply, losing approximately 30% in one day. Within a day of the initial announcement, the first investor suit was filed. In the next few days, the company made additional explanatory disclosures, and the stock price fell even further. More investor suits were filed. The action at hand is the product of the consolidation of these suits. Plaintiff investor class filed claims against defendants under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.S. §§ 78j(b), 78(t)(a). Plaintiff claimed that defendants made earnings overstatements, failed to disclose purchases of inventory without the usual discounts, made sales overstatements, and made certain misrepresentations of earnings forecasts. The district court dismissed all claims for failure to state a claim for which relief could be granted and for failure to plead fraud with specificity and denied plaintiff's motion for leave to amend.
Did the Complaint survive scrutiny under Rule 12(b)(6)?
The court concluded that the Complaint survives scrutiny under Rule 12(b)(6) to the extent that it alleges: (1) that the defendants overstated BCF's quarterly income by 2-3 cents per share in each quarter of fiscal year 1994; (2) that management's expression of "comfort" with analysts' projections of a mid-range of earnings of $ 1.20 to $ 1.30 per share for fiscal 1994 was unreasonable when made. Neither of these claims, however, survives Rule 9(b)'s particularity requirements. Ordinarily, complaints dismissed under Rule 9(b) are dismissed with leave to amend. The court found that the reason for the denial of leave to amend here appears to be that the court thought plaintiffs had failed the threshold burden of stating claims that could survive a Rule 12(b)(6) motion. However, since the court held that the above-mentioned claims did pass Rule 12(b)(6) the court reversed the court's denial of leave to amend on these claims. In all other respects, it affirmed the district court.