Argued: September 15, 2017
from the United States District Court for the Eastern
District of North Carolina, at Greenville. James C. Dever
III, Chief District Judge. (4:14-cv-00092-D)
Charles J. Piven, BROWER PIVEN, Stevenson, Maryland, for
Gregory Lewis Watts, WILSON SONSINI GOODRICH & ROSATI,
Seattle, Washington, for Appellees.
Michael A. Ostrander, WILSON & RATLEDGE, PLLC, Raleigh,
North Carolina; David A.P. Brower, Richard H. Weiss, BROWER
PIVEN, New York, New York, for Appellant.
Whitman, Tobias S. Hampson, WYRICK ROBBINS YATES & PONTON
LLP, Raleigh, North Carolina; Barry M. Kaplan, WILSON SONSINI
GOODRICH & ROSATI, Seattle, Washington, for Appellees.
WILKINSON, DUNCAN, and THACKER, Circuit Judges.
DUNCAN, Circuit Judge:
Maguire Financial, LP ("Maguire Financial") appeals
the district court's dismissal of its amended complaint
in this securities fraud class action. Maguire Financial
argues that the district court erred in holding that a
statement by the CEO of PowerSecure International, Inc.
("PowerSecure"), to securities analysts that the
company had secured a "contract renewal" could not
form the basis for liability under § 10(b) of the
Securities Exchange Act of 1934 (the "Exchange
Act"), see 15 U.S.C. § 78(b), and Rule
10b-5, see 17 C.F.R. § 240.10b-5, because the
amended complaint failed to adequately allege scienter. For
the reasons that follow, we affirm.
provides utility and energy technologies to electric
utilities and their customers. Sidney Hinton, PowerSecure's
president and CEO, has three decades of experience in the
energy industry. Hinton certified PowerSecure's financial
reports and signed its annual and quarterly SEC filings.
has three operating segments: Interactive Distributed
Generation ("DG"), Energy Efficiency
("EE"), and Utility Infrastructure
("UI"). Its UI products and services include
transmission and distribution system construction and
maintenance, installation of advanced metering and efficient
lighting, and emergency storm restoration. The UI segment
generated 41% of PowerSecure's 2013 revenue. During the
class period, Florida Power & Light
("FP&L") was the largest electric utility in
Florida and had a three-year contract with PowerSecure for
the West Palm Beach area that was soon to expire.
FP&L's contract accounted for approximately 10% of
PowerSecure's UI revenue and about 4.1% of its total
issued a press release on June 6, 2013, announcing that it
had "added approximately $75 million to its revenue
backlog, including approximately $49 million from a renewed
and expanded three year utility infrastructure (UI) award to
serve one of the nation's largest investor owned
utilities (IOUs)." J.A. 412. On August 7, 2013, Hinton
stated during a conference call and live webcast for
securities analysts and investors that PowerSecure was
"blessed to announce securing a $49 million three-year
contract renewal, both the renewal and expansion with one of
the largest investor [owned] utilities in the country."
J.A. 412. Investment analysts reacted positively to the
announcement, and the next day PowerSecure's common stock
rose more than 10% to close at $17.71 per share.
August 16, 2013, PowerSecure sold 2.3 million shares at $16
per share, and Hinton sold 200, 000 shares from his personal
holdings at the same price. Hinton also transferred to his
wife approximately $2.5 million of his PowerSecure stock in
December 2013 and February 2014 as part of a divorce
7, 2014, PowerSecure surprised the market by reporting a
first quarter loss of almost $4.3 million as its cost of
sales increased 34% and operating expenses grew by 39%.
Hinton stated on a conference call with analysts that same
day that FP&L had "changed the geographies we were
serving" from West Palm Beach to Ft. Myers and that
"we probably underestimated the negativity [and] the
complexity of basically starting from scratch in a new
territory." J.A. 417-18. Since it was not feasible for
PowerSecure's employees in West Palm Beach to commute 125
miles to Ft. Myers to fulfill the new contract, they left the
company to work for other contractors. Consequently,
PowerSecure had to hire and train new workers in Ft. Myers at
significant expense. Although the new contract offered