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scienter. These allegations include the indictment of two former Whitney independent

contractors and the termination of a former employee, neither of whom are named

defendants.9 Putting aside that after every press release and announcement by the

Company in the Post Class Period resulted in the stock price going up, there is no

attempt to link the post class period developments to the individual defendants or

plaintiff’s theories of fraud. The Court therefore agrees that any post class

developments are not relevant or indicative of scienter.

6. Loss Causation


The Whitney Defendants also argue that the CAC is deficient because it fails to

adequately plead loss causation. As noted above, loss causation has been defined as

“a causal connection between the material misrepresentation and the [economic] loss.”

Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 342 (2005); see 15 U.S.C. §78u-4(b)(4). In

Dura, the Supreme Court held that the loss causation requirement cannot be satisfied

simply by pleading that a stock was purchased at an “artificially inflated price,” but that

the allegations of the complaint must demonstrate that the shares fell “after the truth

became known” with respect to the misrepresentations or omissions set forth in

9Two former Whitney independent contractors went to trial on charges of conspiracy and wire fraud in connection with statements made during sales presentations for the Company’s educational seminar. They were convicted. However, the district court granted their motion for judgment of acquittal, finding in part that there was insufficient evidence that the Company’s business model was a sham and/or that the former employees conspired on the party of the Company to defraud students. United States v. Woolf, No. 1:08cr12 (W.D. Va. Oct 23, 2009). Thus, even if the Court were to consider these events, they certainly cannot be said to support a cogent inference of scienter.


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