                    Case: 12-12196               Date Filed: 12/13/2012   Page: 1 of 8

                                                                              [DO NOT PUBLISH]

                      IN THE UNITED STATES COURT OF APPEALS

                                   FOR THE ELEVENTH CIRCUIT
                                    ________________________

                                            No. 12-12196
                                        Non-Argument Calendar
                                      ________________________

                           D.C. Docket No. 8:10-cv-02317-SDM-MAP

MARGARET JAYNE KINNETT,
individually and on behalf of all others
similarly situated, et al.,

llllllllllllllllllllllllllllllllllllllllllllll                            Plaintiffs,

OKLAHOMA FIREFIGHTERS PENSION AND
RETIREMENT SYSTEM,

lllllllllllllllllllllllllllllllllllllllllllllll                           Movant-Appellant,

                                                        versus

STRAYER EDUCATION, INC.,
ROBERT S. SILBERMAN,
MARK C. BROWN,
KARL MCDONNELL,

lllllllllllllllllllllllllllllllllllllllllllllll                Defendants-Appellees.
                                      ________________________

                           Appeal from the United States District Court
                               for the Middle District of Florida
                                 ________________________
                                     (December 13, 2012)
                  Case: 12-12196       Date Filed: 12/13/2012        Page: 2 of 8

Before HULL, MARCUS and MARTIN, Circuit Judges.

PER CURIAM:

       Appellant Oklahoma Firefighters Pension and Retirement System appeals from

the district court’s final judgment in favor of Appellees Strayer Education, Inc.,

Robert S. Silberman, Mark C. Brown, and Karl McDonnell (collectively, “Strayer”).

The district court, adopting in full the report and recommendation of the magistrate

judge, dismissed Appellant’s complaint, which alleged, on behalf of all persons who

purchased Strayer common stock between November 1, 2007 and January 7, 2011,

that Strayer had made false or misleading statements during that period concerning

its recruitment and enrollment practices, in violation of sections 10(b) and 20(a) of

the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a).1 On appeal,

Appellant argues that the district court erred in concluding that Appellant had failed

to satisfy all three elements of a securities fraud claim ((1) a false or misleading



       1
           Section 10(b) of the Exchange Act provides:

       It shall be unlawful for any person, directly or indirectly, ... [t]o use or employ, in
       connection with the purchase or sale of any security ... any manipulative or
       deceptive device or contrivance in contravention of such rules and regulations as
       the Commission may prescribe as necessary or appropriate in the public interest or
       for the protection of investors.

15 U.S.C. § 78j(b). Section 20(a) of the Exchange Act provides for liability of “controlling
persons” who aid and abet “any person liable under any provision of this chapter or of any rule or
regulation thereunder.” 15 U.S.C. § 78t(a).

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statement; (2) scienter; and (3) loss causation) and in dismissing the complaint. After

careful review, we affirm.

      We review a district court’s order dismissing a complaint de novo. FindWhat

Investor Group v. FindWhat.com, 658 F.3d 1282, 1295 (11th Cir. 2011). At the

motion to dismiss stage, we accept all well-pleaded facts as true, and construe the

reasonable inferences therefrom in the light most favorable to the plaintiff. Garfield

v. NDC Health Corp., 466 F.3d 1255, 1261 (11th Cir. 2006).

      To state a claim under § 10(b), a plaintiff must allege:

      (1) a material misrepresentation or omission; (2) made with scienter; (3)
      a connection with the purchase or sale of a security; (4) reliance on the
      misstatement or omission; (5) economic loss [i.e., damages]; and (6) a
      causal connection between the material misrepresentation or omission
      and the loss, commonly called “loss causation.”

FindWhat, 658 F.3d at 1295 (quotation omitted; emphasis added); see Dura Pharms.,

Inc. v. Broudo, 544 U.S. 336, 341-42 (2005). Because all six elements are required

in order to state a § 10(b) claim, and because we conclude that the element most

starkly absent from Appellant’s pleading was loss causation, that is the only one we

address here.

      The loss causation element requires that a defendant’s fraud be both the but-for

and proximate cause of a plaintiff’s later losses. FindWhat, 658 F.3d at 1309; cf.

Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 344-45 (2005) (noting the “common-law

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roots of the securities fraud action” and basing its loss causation analysis on

common-law tort causation). Thus, the plaintiff must show that the defendant’s fraud

-- as opposed to some other factor -- proximately caused his claimed losses. Dura,

544 U.S. at 342-43; FindWhat, 658 F.3d at 1309. Further, a plaintiff may not

establish loss causation by simply alleging a security was purchased at an artificially

inflated price. Dura, 544 U.S. at 342-43, 347. However, the plaintiff need not show

that the defendant’s misconduct was the “sole and exclusive cause” of his injury; he

need only show that the defendant’s act was a “substantial” or “significant

contributing cause.” FindWhat, 658 F.3d at 1309; Robbins v. Koger Properties, Inc.,

116 F.3d 1441, 1447 (11th Cir. 1997).

      Appellant claims that as a result of Strayer’s fraud concerning its recruitment

and enrollment practices, new student enrollments decreased by 20%, which in turn

lowered the stock price. Appellant primarily focuses its loss-causation allegations on

statements made in a question-and-answer session following a January 10, 2011,

conference call that Strayer held with investors. During this session, Strayer’s CEO

Silberman had the following exchange with analyst Amy Junker prior to trading on

January 10, 2010:

      AMY JUNKER, ANALYST, ROBERT BAIRD: I’m hoping you can
      just touch a little bit on any additional color on why you think starts
      have degraded so much since last quarter. Do you still believe that

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      negative press is kind of the only plausible explanation as you talked
      about last quarter? Were you seeing any evidence that students have
      become perhaps more debt averse or any of the reasons that you’re
      getting from the students themselves to indicate why this is happening?

      ROBERT SILBERMAN: Sure. I mean Karl [McDonnell] is here, and
      he can comment as well. I don’t know of any specific set of concerns
      with regard to pricing or debt capacity. Our new student enrollment was
      fairly consistent across all of our geographic regions in terms of the
      impact. So I would -- there is nothing geographic that I would look at.

      I do think that negative publicity and just a general sense of -- you have
      to bear in mind the difficulty that students go through in terms of
      deciding to go back to school, there is always a lot of reasons not to do
      it, and the negative publicity in the last four or five months certainly has
      had an impact. We have also been I would admit somewhat distracted
      internally here over the last two or three months just in dealing with
      some of the ramifications of not just the publicity but the actual
      governmental activity.

Doc. 40 at 87, ¶ 199 (emphases added). From this exchange, Appellant argues that

Strayer admitted that a cause in the drop in new student starts was that it had been

forced by the government to change its recruitment practices.              Further, says

Appellant, Strayer admitted that its prior practices had been contrary to government

guidelines -- and were not the passive recruitment tactics that Strayer had represented

that it used to investors -- and that these improper practices led to decreased student

enrollment, and thus, lower stock prices.

      However, as the district court reasoned, these statements do not reveal that

Strayer was admitting that it had engaged in improper recruitment and enrollment

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practices, that those alleged improper practices either bolstered or were intended to

bolster student enrollment numbers, that prior student enrollment numbers were the

result of improper recruitment and enrollment practices, that Strayer implemented

internal reforms as to the alleged improper practices, or that any reforms affected

enrollment numbers. Indeed, Silberman said nothing about Strayer’s recruitment

practices during the relevant exchange. If anything, the statements indicate that

dealing with governmental activity is a time-consuming task that distracts

management attention from running the university, and that Strayer believed any

decline in enrollment derived from the negative press surrounding the government

activity with respect to the for-profit secondary education industry, not any changes

in its recruitment or enrollment practices.

      In short, the admission that Strayer’s enrollments were effected by

“governmental activity” does not reveal that Strayer’s enrollment practices had not

previously conformed with the government standards, as codified in the Higher

Education Act or Strayer’s internal code of ethics, or that Strayer modified its

enrollment practices because of government scrutiny. Appellant argues that it is

ambiguous what Silberman was referring to, and that this ambiguity should not be

resolved against Appellant on a motion to dismiss. However, the Supreme Court has

said that factual allegations in a complaint “must be enough to raise a right to relief

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above the speculative level,” Bell Atlantic Corporation v. Twombly, 550 U.S. 544,

555 (2007), and that “[a] claim has facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Moreover, specific to the situation at hand, the Supreme Court has expressly

demanded a complaint to allege “something beyond the mere possibility of loss

causation.” Twombly, 550 U.S. at 557 (citing Dura, 544 U.S. at 347).

      Here, without any explicit mention of Strayer’s recruitment practices or even

any change in any of its policies, it is simply not reasonable to infer that Silberman

was somehow conceding that Strayer had engaged in improper recruiting or had been

forced to change its recruiting practices to the detriment of its stock prices. As we’ve

said, while ambiguities are construed in the light most favorable to the nonmovant,

“unwarranted deductions of fact” are not admitted as true in a motion to dismiss.

Aldana v. Del Monte Fresh Produce, N.A., Inc., 416 F.3d 1242, 1246, 1248 (11th Cir.

2005) (quotation omitted). That is exactly what Appellant is urging the courts to do.

Accordingly, since nothing in the statements corrects any prior disclosures by Strayer

or reveals any omissions on Strayer’s part that negatively affected the price of Strayer

common stock, Appellant has failed to adequately allege loss causation. The district

court did not err in dismissing Appellant’s Section 10(b) claim.

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      Nor do we find any error in the district court’s dismissal of Appellant’s Section

20(a) claim. To state a claim under § 20(a), the Appellant needed to allege that: (1)

Strayer committed a primary violation of the securities laws; (2) the individual

defendants possessed the power to control the general business affairs of Strayer; and

(3) the individual defendants possessed the requisite power to directly or indirectly

control or influence the specific corporate policy which resulted in the primary

liability. Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1237 (11th Cir. 2008).

Because a primary violation of the securities laws constitutes an essential element of

a § 20(a) derivative claim, a plaintiff adequately pleads a § 20(a) claim only where

the plaintiff adequately pleads a primary violation. Id. As we’ve discussed, Appellant

failed to adequately plead a violation of § 10(b), and therefore, Appellant failed to

adequately plead a § 20(a) control-person claim. See id. at 1255.

      AFFIRMED.




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