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“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.

  • III.

    Pleading Standards

    • A.

      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:


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