                 FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

DAVID HILDES, individually and as        No. 11-56592
Trustee of The David and Kathleen
Hildes 1999 Charitable Remainder            D.C. No.
Unitrust dated June 25, 1999,            3:08-cv-00008-
                  Plaintiff-Appellant,     BEN-RBB

                  v.
                                           OPINION
ARTHUR ANDERSEN LLP; THOMAS
G. WATROUS, SR.; DOUGLAS S.
POWANDA; JOHN DOE, as the
Executor of the Estate of David A.
Farley,
               Defendants-Appellees,

                 and

JOHN J. MOORES; CHRISTOPHER A.
COLE; RICHARD A. HOSELY;
CHARLES A. NOELL, III; NORRIS
VAN DEN BERG, Outside Directors,
            Intervenors-Appellees.


      Appeal from the United States District Court
         for the Southern District of California
       Roger T. Benitez, District Judge, Presiding

                 Argued and Submitted
           June 7, 2013—Pasadena, California
2             HILDES V. ARTHUR ANDERSEN LLP

                      Filed August 19, 2013

         Before: Stephen S. Trott, Carlos F. Lucero*,
          and William A. Fletcher, Circuit Judges.

                     Opinion by Judge Lucero


                           SUMMARY**


                              Securities

    Reversing the dismissal of a securities fraud action, the
panel held that the district court erred by denying the plaintiff
leave to amend his complaint to add claims under § 11 of the
Securities Act of 1933 against former outside directors of
Peregrine Systems, Inc.

    The panel held that the district court erred in concluding
that amendment would be futile because the “negative
causation” defense barred the proposed claims. The panel
held that the plaintiff sufficiently alleged that material
misstatements in a registration statement caused his losses
even though prior to the filing of the registration statement he
had entered into an agreement that his shares in Harbinger
Corp. be voted in favor of a merger between Peregrine and
Harbinger. The panel reasoned that the plaintiff did not


    *
  The Honorable Carlos F. Lucero, Circuit Judge for the U.S. Court of
Appeals for the Tenth Circuit, sitting by designation.
  **
     This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
            HILDES V. ARTHUR ANDERSEN LLP                  3

irrevocably commit to exchange his Harbinger shares for
Peregrine shares prior to the filing of the registration
statement. In addition, he alleged that if Peregrine’s
registration statement had contained accurate information,
then the merger would not have taken place, and his voting
agreement and proxy would have terminated.


                        COUNSEL

Michael A. Lynn (argued), Steven C. Chin, and Allan M.
Pepper, Kaye Scholer, LLP, New York, New York; Robert G.
Barnes, Kaye Scholer, LLP, Los Angeles, California, for
Plaintiff-Appellant.

Harry A. Olivar, Jr. (argued), John B. Quinn, Valerie Roddy,
and Molly Stephens, Quinn Emanuel Urquhart & Sullivan,
LLP, Los Angeles, California, for Intervenors-Appellees.

Anne H. Hartman and Wayne T. Lamprey, Goodin MacBride
Squeri Ritchie & Day LLP, San Francisco, California; Robert
H. Logan, Keesal, Young & Logan, Long Beach, California,
for Defendants-Appellees.


                        OPINION

LUCERO, Circuit Judge:

    David Hildes appeals from a district court order denying
leave to amend his complaint. Hildes sought to add a claim
under Section 11 of the Securities Act of 1933, 15 U.S.C.
§ 77k, against former outside directors of Peregrine Systems,
Inc. (“Peregrine”). The district court concluded that
4            HILDES V. ARTHUR ANDERSEN LLP

amendment would be futile because the “negative causation”
defense barred Hildes’ proposed claim. It noted that Hildes
entered into a Voting Agreement and Irrevocable Proxy with
Peregrine, which required that Hildes’ shares in Harbinger
Corporation (“Harbinger”) be voted in favor of a merger
between the two companies. Because that agreement was
executed before Peregrine filed an S-4/A registration
statement (“Registration Statement”) with the SEC that is
alleged to contain various omissions and misstatements, the
district court concluded that any misrepresentations in the
Registration Statement could not have caused Hildes’ losses.

    We reject this reasoning. Section 11 imposes broad
liability without regard to reliance or fraudulent intent for any
material misstatements or omissions contained in a
registration statement for the first year that the registration
statement is available. 15 U.S.C. § 77k(a). Although Hildes
agreed to have his Harbinger shares voted in favor of the
merger with Peregrine, he did not irrevocably commit to
exchange those shares for Peregrine shares prior to the filing
of the Registration Statement. Moreover, Hildes alleges that
if Peregrine’s Registration Statement had contained accurate
information, the merger would not have taken place, and
Hildes’ Voting Agreement and Irrevocable Proxy would have
terminated. Accordingly, Hildes sufficiently alleged that the
material misstatements caused his losses, and thus amending
the complaint would not be futile. Exercising jurisdiction
under 28 U.S.C. § 1291, we reverse and remand.

                               I

    In early 2000, Peregrine, a publicly traded software
company, began merger discussions with Harbinger, an
Atlanta-based provider of business-to-business e-commerce
               HILDES V. ARTHUR ANDERSEN LLP                            5

software products.1 Hildes was a director of Harbinger and
beneficially owned 1,384,217 shares of Harbinger common
stock.

    On April 5, 2000, the two companies entered into an
Agreement and Plan of Merger and Reorganization (“Merger
Agreement”). Under the terms of the Merger Agreement,
Harbinger’s board would recommend the merger to its
shareholders. Harbinger would become a wholly-owned
subsidiary of Peregrine, and each outstanding share of
Harbinger common stock would be exchanged for 0.75 shares
of Peregrine common stock. Harbinger’s obligations to effect
the merger were subject to certain conditions, including: (1)
approval of the merger by each company’s shareholders; (2)
acceptance by the SEC of the then to-be-filed S-4
Registration Statement, with no pending or threatened action;
(3) satisfaction that each Peregrine representation and
warranty contained in the Merger Agreement was true and
correct as of both the date of the Merger Agreement and the
date of closing of the merger; and (4) performance by
Peregrine of all agreements and covenants in the Merger
Agreement.

    Article VII of the Merger Agreement provided for
termination under certain circumstances, including: (1) by


    1
      We accept as true all well-pleaded, non-conclusory allegations
contained in a proposed complaint. See Sw. Ctr. for Biological Diversity
v. Berg, 268 F.3d 810, 819–20 (9th Cir. 2001). Accordingly, the
foregoing facts are drawn from Hildes’ proposed second amended
complaint and the documents upon which it necessarily relies. See
Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) (court may look to
documents upon which complaint relies if “(1) the complaint refers to the
document; (2) the document is central to the plaintiff’s claim; and (3) no
party questions the authenticity of the” document).
6            HILDES V. ARTHUR ANDERSEN LLP

either company if the merger was not consummated by
October 31, 2000; (2) by either company if the required
approval of shareholders was not obtained; or (3) by
Harbinger “upon a breach of any representation, warranty,
covenant or agreement” by Peregrine, “or if any
representation or warranty of [Peregrine] shall have become
untrue.” Peregrine warranted that “[n]one of the information
supplied or to be supplied by [Peregrine] for inclusion or
incorporation by reference in . . . the S-4 will, at the time the
S-4 becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any
material fact . . . .”

    As a condition to the Merger Agreement, Hildes and
certain of Harbinger’s shareholders executed voting
agreements with Peregrine in which each granted Peregrine
an irrevocable proxy to vote his or her Harbinger shares in
favor of the merger. Hildes’ Voting Agreement and
Irrevocable Proxy automatically terminated on the earlier of
(1) the Merger Agreement’s termination pursuant to Article
VII, or (2) the effective date of the merger. His proxy was
irrevocable “to the fullest extent permissible by law.” Hildes
was permitted to sell his Harbinger shares prior to the merger,
but only if the purchaser executed a counterpart to the Voting
Agreement and Irrevocable Proxy.

    On May 22, 2000, Peregrine filed its Registration
Statement with the SEC in connection with the merger. It
included financial statements audited by Arthur Andersen
LLP (“Andersen”) and allegedly contained various material
omissions and misrepresentations. Specifically, Hildes
alleges that Peregrine overstated its revenue by over $120
million and understated its net losses by over $190 million.
             HILDES V. ARTHUR ANDERSEN LLP                     7

The former Peregrine outside directors named as defendants
in the suit at bar signed the Registration Statement.

    Shareholders of both companies subsequently approved
the merger, and on June 16, 2000, the transaction was
completed. Peregrine issued approximately thirty million
shares of Peregrine common stock in exchange for all
outstanding shares of Harbinger common stock. According
to Hildes, as a result of Peregrine’s fraud, Peregrine’s stock
price was artificially inflated to a price of $25.56 per share as
of the closing date of the merger.

    On June 30, 2003, the SEC filed a complaint against
Peregrine in the United States District Court for the Southern
District of California, alleging financial fraud in which
Peregrine had “filed materially incorrect financial statements
with the [SEC] for 11 consecutive quarters between April 1,
1999 and December 31, 2001.” Peregrine later consented to
a final judgment enjoining it from further violations of the
securities laws and requiring Peregrine to establish internal
compliance procedures.

    A consolidated class action was also brought by Peregrine
shareholders for financial statement fraud. In re Peregrine
Sys., Inc. Sec. Litig., No. 02-CV-870 (S.D. Cal. filed May 6,
2002). That class entered into settlement agreements with
certain defendants, from which Hildes opted out. Hildes filed
his own lawsuit in the United States District Court for the
District of New Jersey, later transferred to the Southern
District of California, against defendants Andersen, Thomas
Watrous, Douglas Powanda, and John Doe as the Executor of
the Estate of David Farley. He stated Section 11 claims
against Andersen, Watrous, and Doe, along with several other
claims not at issue in this appeal.
8             HILDES V. ARTHUR ANDERSEN LLP

    Andersen filed a motion to dismiss the claims against it.
In response, Hildes moved for leave to amend his complaint
to add scienter allegations as to Andersen and to add as
defendants former Peregrine directors John Moores, Charles
Noell, III, Richard Hosley, Norris Van Den Berg, and
Christopher Cole. Hildes’ proposed second amended
complaint asserted Section 11 claims against all of the
individual defendants. The new proposed defendants moved
to intervene to oppose Hildes’ motion to amend.

    On July 19, 2010, the district court granted Andersen’s
motion to dismiss, granted the outside directors’ motion to
intervene, and denied Hildes’ leave to amend his complaint
to add claims against the outside directors on grounds of
futility. The court determined that Hildes entered into a
binding commitment to exchange his shares for Peregrine’s
shares as a matter of law when he signed his Voting
Agreement and Irrevocable Proxy on April 5, 2000, prior to
the Registration Statement’s effective date. It thus concluded
that any alleged loss was not logically to be attributed to
misrepresentations or omissions in the Registration
Statement.

    Hildes unsuccessfully sought certification of the district
court’s order under Fed. R. Civ. P. 54(b). Following
disposition of Hildes’ remaining claims, the district court
entered final judgment. Hildes filed a timely notice of
appeal, and now raises a single issue: whether the district
court erred in denying him leave to amend his complaint to
bring a Section 11 claim against the directors.2


    2
   The claims against Defendant Watrous were dismissed by stipulation,
but Watrous has agreed to be bound by any decision of this Court with
respect to the other directors. Hildes thus appeals the dismissal of his
              HILDES V. ARTHUR ANDERSEN LLP                            9

                                   II

     We review de novo a district court’s denial of leave to
amend on grounds of futility. Sanford v. MemberWorks, Inc.,
625 F.3d 550, 557 (9th Cir. 2010). Although leave to amend
is to be “freely given when justice so requires,” denial of a
motion to amend is proper if it is clear “that the complaint
would not be saved by any amendment.” Carvalho v. Equifax
Info. Servs., LLC, 629 F.3d 876, 892–93 (9th Cir. 2010)
(internal quotation marks omitted).

    Section 11 of the Securities Act of 1933 imposes liability
on “every person who signed [a] registration statement”
containing “an untrue statement of a material fact or” one that
“omitted to state a material fact required . . . to make the
statements therein not misleading.” 15 U.S.C. § 77k(a). The
statute provides that “any person acquiring such security
(unless it is proved that at the time of such acquisition he
knew of such untruth or omission) may . . . sue . . .” Id. It
further provides:

         If such person acquired the security after the
         issuer has made generally available to its
         security holders an earning statement covering
         a period of at least twelve months beginning
         after the effective date of the registration
         statement, then the right of recovery under
         this subsection shall be conditioned on proof
         that such person acquired the security relying
         upon such untrue statement in the registration
         statement or relying upon the registration


Section 11 claim against Watrous for the limited purpose of including him
in this appeal.
10           HILDES V. ARTHUR ANDERSEN LLP

        statement and not knowing of such omission,
        but such reliance may be established without
        proof of the reading of the registration
        statement by such person.

Id. The plain text of Section 11 thus imposes a reliance
element only as to investors who purchased a security at least
twelve months after the registration statement became
effective.

    The Supreme Court has recognized that Section 11
“places a relatively minimal burden on a plaintiff.” Herman
& Maclean v. Huddleston, 459 U.S. 375, 382 (1983). “The
section was designed to assure compliance with the disclosure
provisions of the Act by imposing a stringent standard of
liability on the parties who play a direct role in a registered
offering.” Id. at 381–82 (footnotes omitted). As long as “a
plaintiff purchased a security issued pursuant to a registration
statement, he need only show a material misstatement or
omission to establish his prima facie case.” Id. at 382.
“Liability against the issuer of a security is virtually absolute,
even for innocent misstatements.” Id. (footnote omitted).

     As numerous courts have held, and the appellees in this
case concede, a plaintiff who purchases a security within
twelve months of the registration statement need not show
reliance to bring a Section 11 claim. See Silverstrand Invs. v.
AMAG Pharms., Inc., 707 F.3d 95, 102 (1st Cir. 2013)
(“[U]nlike § 10(b) of the Securities and Exchange Act, § 11
does not have a scienter or reliance requirement . . . .”);
Hutchison v. Deutsche Bank Sec. Inc., 647 F.3d 479, 484 (2d
Cir. 2011) (“[P]laintiffs alleging violations of Section[] 11
. . . need [not] plead scienter, reliance, or loss causation.”
(internal quotation marks omitted)); In re Constar Int’l Inc.
             HILDES V. ARTHUR ANDERSEN LLP                   11

Sec. Litig., 585 F.3d 774, 784 (3d Cir. 2009) (“Since reliance
is irrelevant in a § 11 case, a § 11 case will never demand
individualized proof as to an investor’s reliance or knowledge
(except where more than twelve months have passed since the
registration statement became effective).”). This court,
among several, has also noted that Section 11 lacks a scienter
requirement. See Anderson v. Clow (In re Stac Elecs. Sec.
Litig.), 89 F.3d 1399, 1404 (9th Cir. 1996) (“No scienter is
required for liability under § 11; defendants will be liable for
innocent or negligent material misstatements or omissions.”
(internal quotation marks omitted)); see also Krim v.
pcOrder.com, Inc., 402 F.3d 489, 495 (5th Cir. 2005)
(“Section 11’s liability provisions are expansive—creating
virtually absolute liability for corporate issuers for even
innocent material misstatements . . . .” (internal quotation
marks omitted)); Carlon v. Thaman (In re NationsMart Corp.
Sec. Litig.), 130 F.3d 309, 315 (8th Cir. 1997) (“To establish
a prima facie § 11 claim, a plaintiff need show only that he
bought the security and that there was a material
misstatement or omission. Scienter is not required for
establishing liability under this section.”).

    Despite the general rule that a plaintiff need not
demonstrate reliance on a misleading registration statement
in order to prevail on a Section 11 claim, the district court
determined that because Hildes entered into his Voting
Agreement and Irrevocable Proxy prior to the issuance of
Peregrine’s fraudulent Registration Statement, Hildes’ claim
was barred under the doctrine of “negative causation.” The
affirmative defense of negative causation prevents recovery
for losses that the defendant proves are not attributable to the
alleged misrepresentation or omission in the registration
statement. See 15 U.S.C. § 77k(e); see also McMahan & Co.
v. Wherehouse Entm’t, Inc., 65 F.3d 1044, 1048 (2nd Cir.
12          HILDES V. ARTHUR ANDERSEN LLP

1995). This court recognized the doctrine in Miller v. Pezzani
(In re Worlds of Wonder Sec. Litig.), 35 F.3d 1407 (9th Cir.
1994), under the name “loss causation.” Id. at 1421. “The
defendant has the burden of proof on this defense,” and bears
a “heavy burden.” Id. at 1422 (internal quotation marks
omitted). A defendant must show “that the depreciation in
value” of a plaintiff’s stock “resulted from factors other than
the alleged material misstatement.” Id. (alteration and
internal quotation marks omitted).

    According to the district court, Hildes’ losses could not
have been caused by the misleading Registration Statement
because Hildes made a binding commitment to exchange his
Harbinger shares for Peregrine stock when he signed his
Voting Agreement and Irrevocable Proxy on April 5, 2000,
prior to the date misrepresentations were made in the
Registration Statement. We disagree. Although the Voting
Agreement and Irrevocable Proxy irrevocably committed
Hildes to have his shares voted in favor of the merger, it did
not irrevocably commit him to exchange his Harbinger shares
for Peregrine shares. Any exchange of shares remained
contingent on the consummation of the merger. As Hildes
plausibly alleges in his proposed second amended complaint,
the merger would not have occurred had the Registration
Statement been truthful.

    Hildes provides several theories under which the planned
merger would have collapsed but for the misrepresentations
in the Registration Statement. First, the proposed second
amended complaint alleges that the Harbinger board would
have declared Peregrine to be in breach of the Merger
Agreement for providing materially false and misleading
information in the Registration Statement, and terminated the
Merger Agreement under Article VII. Had the Merger
            HILDES V. ARTHUR ANDERSEN LLP                   13

Agreement been terminated, Hildes’ Voting Agreement and
Irrevocable Proxy would have expired. Second, the proposed
complaint alleges that a majority of Harbinger shares would
have voted against the merger had the Registration Statement
been truthful. Under this scenario, Hildes’ Harbinger shares
would not have been exchanged for Peregrine stock. Given
the allegation that more than 85% of Harbinger shares were
not bound by proxy agreements, coupled with the magnitude
of the alleged financial misstatements, these allegations
provide a second plausible theory under which the
Registration Statement’s misrepresentations caused Hildes’
loss.

    Hildes also identifies several means by which he could
have personally avoided the exchange of shares had the
Registration Statement disclosed ongoing accounting
irregularities by Peregrine. He could have attempted to sell
his Harbinger shares to a third party (provided the third party
executed a counterpart to the Voting Agreement and
Irrevocable Proxy), sought to rescind the Voting Agreement
and Irrevocable Proxy based on a claim of fraudulent
inducement, or filed a shareholder suit seeking to enjoin the
merger.

    We conclude that the outside directors have not met their
“heavy burden” of “prov[ing], as a matter of law, that the
depreciation of the value of [the security] resulted from
factors other than the alleged false and misleading
statements.” Provenz v. Miller, 102 F.3d 1478, 1492 (9th Cir.
1996) (internal quotation marks omitted). Overcoming a
negative causation defense requires merely that “the
misrepresentation touches upon the reasons for an
investment’s decline in value.” In re Worlds of Wonder,
35 F.3d at 1422 (internal quotation marks omitted).
14           HILDES V. ARTHUR ANDERSEN LLP

Misrepresentations contained in Peregrine’s Registration
Statement certainly “touch[ed] upon” the decline in value of
Hildes’ investments because, he alleges, the merger would
have failed but for those misrepresentations. Had the merger
not been completed, Hildes would have retained Harbinger
stock rather than obtaining shares in Peregrine.

    Contrary to the directors’ assertions, this is not a case in
which “the decision is made and the parties are committed to
the transaction” prior to the effective date of a registration
statement. APA Excelsior III L.P. v. Premiere Techs., Inc.,
476 F.3d 1261, 1267 (11th Cir. 2007). In APA Excelsior, the
Eleventh Circuit concluded that a Section 11 claim
necessarily fails if a sophisticated investor “participating in
an arms-length corporate merger make[s] a legally binding
investment commitment months before the filing of a
defective registration statement.” Id. at 1277. The outside
directors place great emphasis on this case, noting the striking
resemblance of facts.        There, a target corporation’s
shareholders brought a Section 11 claim against an acquiring
corporation and certain directors and officers, alleging
misrepresentations in a registration statement. Id. at
1264–65. Prior to the effective date of the registration
statement at issue, the target corporation had entered into a
stock-for-stock merger agreement, the board had voted to
recommend the merger to the shareholders, and plaintiffs had
granted irrevocable proxies binding themselves to have their
shares voted in favor of the merger. Id. at 1264.

    The Eleventh Circuit held that plaintiffs’ Section 11 claim
failed as a matter of law because “reliance [wa]s rendered
impossible by virtue of a pre-registration commitment.” Id.
at 1272 (footnote omitted). “[B]y virtue of their binding
commitment decision,” the court determined, plaintiffs
             HILDES V. ARTHUR ANDERSEN LLP                       15

“effectively ‘purchased’ their [acquiring company’s] stock
months before the registration statement was filed.” Id. at
1276. Significantly, because it deemed the issue waived, the
court in APA Excelsior declined to consider plaintiffs’
argument that they “were not fully committed to the merger
before the registration statement because their commitment
was revocable.” Id. at 1269–70.

    In the present case, as noted above, we have concluded
that Hildes was not irrevocably bound to exchange his
Harbinger shares for Peregrine stock at the time the
Registration Statement was filed. Rather, misrepresentations
contained in the Registration Statement played a role in the
causal chain that resulted in the exchange of stock. We are
thus not presented with the issue decided in APA Excelsior.
Although that court did not consider whether plaintiffs were
committed to exchange stock based on a set of agreements
similar to those at issue in this case, it did note that a plaintiff
seeking to recover under Section 11 “need only show a
material misstatement and/or omission in the registration
statement and be able to ‘trace’ the security he acquired to
that defective statement.” Id. at 1271 (citations omitted).
Hildes’ allegations satisfy this traceability requirement.

    Other cases relied upon by the outside directors are also
inapposite. In In re HealthSouth Corp. Securities Litigation,
261 F.R.D. 616 (N.D. Ala. 2009), the court held that plaintiffs
who purchased unregistered bonds with the intent of
converting them to registered bonds after the filing of a
registration statement could not assert a Section 11 claim. Id.
at 647. It explained that the decision to purchase the
unregistered bonds was made prior to filing of the registration
statement and thus causation was impossible. Id. The court
rejected plaintiffs’ theory that the SEC would not have
16           HILDES V. ARTHUR ANDERSEN LLP

permitted the registration statement to become effective had
it been truthful—and thus the unregistered bonds would not
have been exchanged for registered bonds—because in that
hypothetical scenario plaintiffs “would have been stuck with”
the less valuable unregistered bonds and thus the loss “would
have occurred” anyway. Id. at 648. Accordingly, the court
concluded that plaintiffs’ losses were “not traceable to a
registration statement and no basis arises for a Section 11
claim.” Id.; see also In re Refco, Inc. Sec. Litig., 503 F. Supp.
2d 611, 634, 636 (S.D.N.Y. 2007) (concluding alleged
misrepresentations were immaterial given that unregistered
bondholders would have incentive to exchange their bonds
for registered ones regardless of contents of registration
statement, and thus plaintiffs were not “caused to suffer
damages”). As the foregoing discussion demonstrates,
however, Hildes’ losses can be causally traced to the
misrepresentations contained in the Registration Statement.

    This case is more analogous to SEC v. National Student
Marketing Corp., 457 F. Supp. 682 (D.D.C. 1978). That case
also involved a stock-for-stock merger of two companies. Id.
at 688-89. After the merger agreement was executed, but
before the transaction closed, the acquiring company made
certain adjustments to its interim financials. Id. at 691. The
SEC charged various individuals with Securities Act
violations for failing to disclose this material information. Id.
at 699-700. Defendants contended that there was no nexus
between their conduct and the “sale” of stock because the
principals of the target corporation had already committed
themselves to the merger. Id. at 702. However, the court
concluded that the plaintiffs “had no expectation or duty to
proceed with the sales if the merger was aborted” and that
“[s]uch a conditional commitment is not what the courts had
in mind when setting the time of commitment as the critical
            HILDES V. ARTHUR ANDERSEN LLP                  17

point for antifraud analysis.” Id. at 704 (footnote omitted).
Because the “Merger Agreement specifically stated that the
obligation of either company to proceed with the merger was
subject to the performance of certain conditions,” the court
held that it did not create “a binding, irrevocable
commitment.” Id.

    As with the purchasers in National Student Marketing
Corp., Hildes was not obliged to obtain Peregrine stock at the
time the Registration Statement was filed. His commitment
to the exchange of shares was contingent on a number of
conditions, and he plausibly alleges that the
misrepresentations contained in the Registration Statement
caused those conditions to occur. Under these circumstances,
we do not observe any flaw in Hildes’ claim that his losses
were caused by misrepresentations in Peregrine’s Registration
Statement.

    In concluding that Hildes entered into a binding
commitment to purchase Peregrine stock prior to the
Registration Statement’s effective date, the district court
conflated the issue of loss causation and the question of
whether the Registration Statement’s misrepresentations
caused Hildes to enter into the Voting Agreement and
Irrevocable Proxy in the first place. See Akerman v. Oryx
Commc’ns, Inc., 609 F. Supp. 363, 369 (S.D.N.Y. 1984)
(negative causation defense to Section 11 claim “does not
focus on the causal relationship between the misstatement and
the original purchase, but rather on the relationship between
the misstatement and any subsequent decline in value”), aff’d
in part and dismissed in part on other grounds, 810 F.2d 336
(2d Cir. 1987). Hildes’ proposed second amended complaint
alleges that he purchased Peregrine stock—through the post-
Registration Statement exchange of shares—issued and sold
18              HILDES V. ARTHUR ANDERSEN LLP

pursuant to a misleading registration statement,3 and that his
subsequent losses were caused by the misrepresentations in
that registration statement. This is enough to state a Section
11 claim. See Rubke v. Capitol Bancorp Ltd., 551 F.3d 1156,
1161 (9th Cir. 2009) (noting heightened pleading standards
of the Private Securities Litigation Reform Act of 1995 do not
apply to Section 11 claims and that Fed. R. Civ. P. 9(b)
applies only if the complaint sounds in fraud); see also
Silverstrand Invs., 707 F.3d at 102 (because Section 11 does
not have a reliance requirement, “neither the heightened
pleading standard of Fed. R. Civ. P. 9(b) nor of the Private
Securities Litigation Reform Act applies unless a § 11 claim
sounds in fraud”); Provenz, 102 F.3d at 1492 (although
defendants bear a heavy burden of proof in establishing
negative causation, a plaintiff can establish loss causation by
“simply alleging that the false and misleading statements
touch upon the reasons for the investment’s decline in value”
(alteration and internal quotation marks omitted)).


 3
     SEC Rule 145 provides:

          An offer, offer to sell, offer for sale, or sale shall be
          deemed to be involved, within the meaning of section
          2(3) of the [Securities] Act, so far as the security
          holders of a corporation or other person are concerned
          where . . . there is submitted for the vote or consent of
          such security holders a plan or agreement for . . . [a]
          statutory merger or consolidation or similar plan or
          acquisition in which securities of such corporation or
          other person held by such security holders will become
          or be exchanged for securities of any person . . . .

17 C.F.R. § 230.145(a)(2). Under this definition, Hildes’ exchange of
stock did not become a “sale” under the Securities Act until the merger
plan was submitted to Harbinger shareholders for a vote, after the issuance
of Peregrine’s Registration Statement.
            HILDES V. ARTHUR ANDERSEN LLP                   19

    Because the misrepresentations contained in the
Registration Statement allegedly caused the ultimate
exchange of Hildes’ Harbinger shares for Peregrine stock, we
disagree with the district court’s conclusion that the negative
causation defense applies. And because the exchange of
shares—which occurred after the Registration Statement was
filed—constituted Hildes’ acquisition of those securities
pursuant to a registration statement, he has stated a
potentially meritorious Section 11 claim.

                             III

   For the foregoing reasons, the judgment of the district
court is REVERSED. The case is REMANDED for further
proceedings consistent with this opinion.
