“deferred revenues” theory). Second, that the Company committed fraud because it
failed to disclose: (1) increased customer “chargebacks” (in which some customers
asked their credit card companies to refund the money they paid the Company for
tuition); and (2) the reaction to these chargebacks by the banks processing credit card
payments to the Company (the “chargebacks theory.”) Third, the Company committed
fraud because its entire business model was a “sham” and that it had a duty, and failed,
to disclose certain background information about its founder (the “business model”
theory). Each of the theories will be discussed in detail below in analyzing whether
plaintiff has adequately plead securities fraud violations under any theory as to the
Whitney Defendants or the Auditor Defendant.
General - Rule 12(b)(6)
On a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the Court accepts as true
all the allegations in the complaint and construes them in the light most favorable to the
plaintiff. Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1262 (11th Cir. 2004).
Further, the Court favors the plaintiff with all reasonable inferences from the allegations
in the complaint. Stephens v. Dep't of Health & Human Servs., 901 F.2d 1571, 1573
(11th Cir. 1990). The standard on a 12(b)(6) motion is not whether the plaintiff will
ultimately prevail in his or her theories, but whether the allegations are sufficient to allow
the plaintiff to conduct discovery in an attempt to prove the allegations. See Jackam v.
Hosp. Corp. of Am. Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir. 1986).
Although Rule 8 requires “a short and plain statement of the claim,” Fed. R. Civ.
P. 8(a)(2), the Supreme Court has explained that: