This section contains the nature of the case and procedural background.

D is a manufacturer of generic drugs, a highly volatile business. D was profitable in 1995 but lost money in the second quarter of 1996. On August 2, 1996, D issued a press release that acknowledged business problems and also showed some optimism. The stock rose. On September 30, the last day of the quarter, D announced that it anticipated a $43 million loss. On November 11, D announced a $179 million loss for the third quarter, $104 million of which was a reduction in the carrying value of the goodwill. None of the prior press releases mentioned the possibility of a goodwill write-down. The stock plummeted. Ps represent a class of purchasers of D stock between August 2, 1996, and November 11, 1996. Ps sued Ds claiming fraud under the Securities Exchange Act § 10(b), Rule 10b-5, and common-law negligent misrepresentation. Ps present two theories of liability: D's economic projections were fraudulent, and D's disclosure of factors affecting its projections misled by omitting the possibility of a goodwill write-down. Ds moved to dismiss based on the safe-harbor provision and heightened pleading requirements under the PSLRA. The district court dismissed the complaint under Fed.R.Civ.P. 12(b)(6). Ps appealed.

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