                 FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

IN RE: CENTURY ALUMINUM                   No. 11-15599
COMPANY SECURITIES
LITIGATION ,                                D.C. No.
                                        3:09-cv-01001-SI
ERIC PETZSCHKE , individually
and on behalf of all others
similarly situated; STUART               ORDER AND
WEXLER, lead plaintiff for the         AMENDED OPINION
Securities Act claims; CORY
MCCLELLAN ; PETER ABRAMS;
CHRIS MCNULTY ,
              Plaintiffs-Appellants,

                 v.

CENTURY ALUMINUM COMPANY ;
LOGAN W. KRUGER; MICHAEL A.
BLESS; STEVE SCHNEIDER; JOHN
C. FONTAINE ; JACK E.
THOMPSON ; PETER C. JONE; JOHN
P. O’BRIEN ; WILLY R.
STROTHOTTE; JARL BERNTZEN ;
CREDIT SUISSE SECURITIES (USA)
LLC; MORGAN STANLEY & CO .,
            Defendants-Appellees.


      Appeal from the United States District Court
        for the Northern District of California
        Susan Illston, District Judge, Presiding
2               IN RE: CENTURY ALUMINUM CO .

                    Argued and Submitted
          August 8, 2012—San Francisco, California

                      Filed January 2, 2013
                     Amended April 17, 2013

Before: Consuelo M. Callahan and Paul J. Watford, Circuit
 Judges, and James K. Singleton, Senior District Judge.*

                    Opinion by Judge Watford


                           SUMMARY**


                         Securities Fraud

    The panel affirmed the dismissal for lack of statutory
standing of an action under § 11 of the Securities Act of
1933, alleging that a company’s securities were issued under
a materially false or misleading registration statement.

    The panel held that the plaintiffs did not adequately allege
that their aftermarket shares were traceable to a secondary
offering in connection with which the company issued a
prospectus supplement treated as part of the company’s
registration statement. The panel held that the plaintiffs’
allegations did not give rise to a reasonable inference that


 *
   The Honorable James K. Singleton, Senior United States District Judge
for the District of Alaska, 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.
              IN RE: CENTURY ALUMINUM CO .                   3

their shares were traceable to the secondary offering because
the allegations also were consistent with the shares having
come from a previously issued pool.

    The panel stated that the district court should have
addressed defendants’ motion to dismiss under Federal Rule
of Civil Procedure 12(b)(6), rather than Rule 12(b)(1),
because failure to allege statutory standing results in failure
to state a claim on which relief can be granted, not the
absence of subject matter jurisdiction. The panel affirmed on
the basis that dismissal was proper under Rule 12(b)(6).


                         COUNSEL

Francis M. Gregorek, Betsy C. Manifold, Rachele R. Rickert,
and Patrick M. Moran (argued), Wolf Haldenstein Adler
Freeman & Herz LLP, San Diego, California, for Plaintiffs-
Appellants.

Bruce A. Ericson, Kevin M. Fong, and Jeffrey S. Jacobi,
Pillsbury Winthrop Shaw Pittman LLP, San Francisco,
California, for Defendants-Appellees Century Aluminum
Company, Logan W. Kruger, John C. Fontaine, Jack E.
Thompson, Peter C. Jones, John P. O’Brien, Willy R.
Strothotte, Jarl Berntzen, Robert E. Fishman, Catherine Z.
Manning, Steve Schneider and Michael A. Bless.

Robert P. Varian (argued) and Stephen M. Knaster, Orrick
Herrington & Sutcliffe LLP, San Francisco, California, for
Defendants-Appellees Credit Suisse Securities (USA) LLC
and Morgan Stanley & Co. LLC.
4             IN RE: CENTURY ALUMINUM CO .

                          ORDER

   The opinion filed on January 2, 2013, and published at
704 F.3d 1119, is amended as follows:

    At 704 F.3d at 1123, after the paragraph ending with the
phrase, <. . . came from the pool of previously issued
shares.>, insert the following as a new paragraph:

    <This holding is consistent with our opinion in Starr v.
Baca, 652 F.3d 1202 (9th Cir. 2011), where there were two
plausible explanations in contention. Id. at 1216. “If there
are two alternative explanations, one advanced by defendant
and the other advanced by plaintiff, both of which are
plausible, plaintiff’s complaint survives a motion to dismiss
under Rule 12(b)(6).” Id. (emphasis added). Here, however,
plaintiffs’ explanation is merely possible rather than
plausible. To render their explanation plausible, plaintiffs
must do more than allege facts that are merely consistent with
both their explanation and defendants’ competing
explanation. See Iqbal, 556 U.S. at 678. The plaintiff in
Starr did so. He alleged facts which, accepted as true, tended
to exclude the possibility that the defendant was ignorant of
the unconstitutional conduct of his subordinates (the
competing alternative explanation for why the defendant
allegedly took no action to stop that misconduct). See Starr,
652 F.3d at 1216. Plaintiffs have not offered allegations of
this nature here.>

    With this amendment, the panel votes to deny the petition
for panel rehearing. Judges Callahan and Watford vote to
deny the petition for rehearing en banc, and Judge Singleton
so recommends. The full court has been advised of the
petition for rehearing en banc and no judge has requested a
              IN RE: CENTURY ALUMINUM CO .                    5

vote on whether to rehear the matter en banc. Fed. R. App. P.
35.

    The petition for panel rehearing and the petition for
rehearing en banc, filed January 16, 2013, are DENIED. No
further petitions for rehearing or for rehearing en banc will be
accepted.



                          OPINION

WATFORD, Circuit Judge:

    Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k,
provides a cause of action to any person who buys a security
issued under a materially false or misleading registration
statement. Plaintiffs need not have purchased shares in the
offering made under the misleading registration statement;
those who purchased shares in the aftermarket have standing
to sue provided they can trace their shares back to the
relevant offering. Hertzberg v. Dignity Partners, Inc.,
191 F.3d 1076, 1080 (9th Cir. 1999); Lee v. Ernst & Young,
LLP, 294 F.3d 969, 978 (8th Cir. 2002). When all of a
company’s shares have been issued in a single offering under
the same registration statement, this “tracing” requirement
generally poses no obstacle. Hertzberg, 191 F.3d at 1082.
But when a company has issued shares under more than one
registration statement, the plaintiff must prove that her shares
were issued under the allegedly false or misleading
registration statement, rather than some other registration
statement. Id. at 1080 n.4.
6                    IN RE: CENTURY ALUMINUM CO .

    This case involves the latter scenario. Plaintiffs
purchased shares in defendant Century Aluminum Company
at the end of January 2009. In March 2009, shortly after
Century Aluminum restated its cash flows from operating
activities, plaintiffs sued the company (and others) under
§ 11.1 Plaintiffs allege that the shares they purchased were
issued under a materially false and misleading prospectus
supplement dated January 28, 2009, which is treated as part
of the company’s registration statement for purposes of § 11.
Century Aluminum issued the prospectus supplement in
connection with a secondary offering of 24.5 million shares
of the company’s common stock. When the secondary
offering commenced, more than 49 million shares of Century
Aluminum common stock were already in the market. To
prevail, plaintiffs would need to prove that the shares they
purchased came from the pool of shares issued in the
secondary offering, rather than from the pool of previously
issued shares.

   Plaintiffs could satisfy this requirement in one of two
ways. First, plaintiffs could prove that they purchased their

    1
        Section 11 provides in relevant part:

             In case any part of the registration statement, when
             such part became effective, contained an untrue
             statement of a material fact or omitted to state a
             material fact required to be stated therein or necessary
             to make the statements therein not misleading, any
             person acquiring such security (unless it is proved that
             at the time of such acquisition he knew of such untruth
             or omission) may, either at law or in equity, in any
             court of competent jurisdiction, sue [specified
             defendants].

         15 U.S.C. § 77k(a).
              IN RE: CENTURY ALUMINUM CO .                  7

shares directly in the secondary offering itself. Such proof
would obviously eliminate any questions about the lineage of
plaintiffs’ shares. Plaintiffs are not arguing here, however,
that they bought directly in the secondary offering; they
concede that they purchased in the aftermarket. (The Third
Amended Complaint acknowledges that plaintiffs did not buy
their shares directly from the underwriters, and none of the
plaintiffs bought shares at the offering price of $4.50 per
share.)

    Second, plaintiffs could prove that their shares, although
purchased in the aftermarket, can be traced back to the
secondary offering. See Joseph v. Wiles, 223 F.3d 1155,
1159 (10th Cir. 2000). That is easier said than done. It
would require plaintiffs to trace the chain of title for their
shares back to the secondary offering, starting with their own
purchases and ending with someone who bought directly in
the secondary offering. Courts have long noted that tracing
shares in this fashion is “often impossible,” because “most
trading is done through brokers who neither know nor care
whether they are getting newly registered or old shares,” and
“many brokerage houses do not identify specific shares with
particular accounts but instead treat the account as having an
undivided interest in the house’s position.” Barnes v.
Osofsky, 373 F.2d 269, 271–72 (2d Cir. 1967). Though
difficult to meet in some circumstances, this tracing
requirement is the condition Congress has imposed for
granting access to the “relaxed liability requirements” § 11
affords. Abbey v. Computer Memories, Inc., 634 F. Supp.
870, 875 (N.D. Cal. 1986); see Krim v. pcOrder.com, Inc.,
402 F.3d 489, 496 (5th Cir. 2005).

   The question raised by this appeal is whether plaintiffs
have adequately alleged that their shares are traceable to the
8              IN RE: CENTURY ALUMINUM CO .

secondary offering. Plaintiffs argue that it was enough for
them to allege, without more, that they “purchased Century
Aluminum common stock directly traceable to the
Company’s Secondary Offering.” Some district courts have
held that this allegation suffices,2 and before Bell Atlantic
Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v.
Iqbal, 556 U.S. 662 (2009), it probably did. But Iqbal and
Twombly moved us away from a system of pure notice
pleading. See 5 Charles Alan Wright et al., Federal Practice
and Procedure § 1216, at 71 (Supp. 2012). In addition to
providing fair notice, the complaint’s allegations must now
suggest that the claim has at least a plausible chance of
success. As Iqbal put it, the complaint must allege “factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678.

    The level of factual specificity needed to satisfy this
pleading requirement will vary depending on the context.
Robbins v. Oklahoma, 519 F.3d 1242, 1248 (10th Cir. 2008).
For example, alleging that the plaintiff’s shares are “directly
traceable” to the offering in question might well suffice, even
without “further factual enhancement,” Twombly, 550 U.S. at
557, when all of the company’s shares were issued in a single
offering under a single registration statement. See Joseph,
223 F.3d at 1160. In that context, alleging that the plaintiff’s
shares are directly traceable to the offering in question states
a claim “that is plausible on its face.” Twombly, 550 U.S. at
570. No further factual enhancement is needed because by


    2
    See, e.g., In re Wachovia Equity Sec. Litig., 753 F. Supp. 2d 326,
372–73 (S.D.N.Y. 2011); In re Royal Ahold N.V. Sec. & ERISA Litig.,
351 F. Supp. 2d 334, 401 (D. Md. 2004); In re SeeBeyond Techs. Corp.
Sec. Litig., 266 F. Supp. 2d 1150, 1171–72 (C.D. Cal. 2003).
              IN RE: CENTURY ALUMINUM CO .                     9

definition all of the company’s shares will be directly
traceable to the offering in question. See DeMaria v.
Andersen, 318 F.3d 170, 176 (2d Cir. 2003).

    When a company has issued shares in multiple offerings
under more than one registration statement, however, a
greater level of factual specificity will be needed before a
court can reasonably infer that shares purchased in the
aftermarket are traceable to a particular offering. Making this
determination is “a context-specific task that requires the
reviewing court to draw on its judicial experience and
common sense.” Iqbal, 556 U.S. at 679. As noted earlier,
experience and common sense tell us that when a company
has offered shares under more than one registration statement,
aftermarket purchasers usually will not be able to trace their
shares back to a particular offering. Thus, in this case,
plaintiffs had to allege facts from which we can reasonably
infer that their situation is different. Standing alone, the
conclusory allegation that plaintiffs “purchased Century
Aluminum common stock directly traceable to the
Company’s Secondary Offering” does not allow us to draw a
reasonable inference about anything because it is devoid of
factual content.

    Plaintiffs say they have offered further factual specificity,
and point to allegations regarding the dates on which and the
prices at which they purchased their shares, as well as
allegations concerning the trading volume of Century
Aluminum stock on certain dates. For example, one of the
plaintiffs allegedly purchased 5,000 shares of Century
Aluminum common stock on January 28, 2009, at $4.56 per
share, and 3,000 shares on January 30, 2009, at $3.56 per
share. (The complaint contains similar allegations for the
other named plaintiffs.) In addition, the complaint alleges a
10            IN RE: CENTURY ALUMINUM CO .

sharp spike in trading volume and a sharp drop in price of
Century Aluminum’s stock between January 28 and 30, 2009,
movements that occurred, plaintiffs say, because the
underwriters of the secondary offering “began flooding the
market with Century Aluminum common stock that they had
purchased in the Secondary Offering.”

     These allegations do not give rise to a reasonable
inference that plaintiffs’ shares are traceable to the secondary
offering. Accepting the allegations as true, plaintiffs’ shares
could have come from the secondary offering, but the
“obvious alternative explanation” is that they could instead
have come from the pool of previously issued shares.
Twombly, 550 U.S. at 567. Plaintiffs’ allegations are
consistent with their shares having come from either source.
When faced with two possible explanations, only one of
which can be true and only one of which results in liability,
plaintiffs cannot offer allegations that are “merely consistent
with” their favored explanation but are also consistent with
the alternative explanation. Iqbal, 556 U.S. at 678 (internal
quotation marks omitted). Something more is needed, such
as facts tending to exclude the possibility that the alternative
explanation is true, see Twombly, 550 U.S. at 554, in order to
render plaintiffs’ allegations plausible within the meaning of
Iqbal and Twombly. Here, plaintiffs’ allegations remain stuck
in “neutral territory,” Twombly, 550 U.S. at 557, because they
do not tend to exclude the possibility that their shares came
from the pool of previously issued shares.

    This holding is consistent with our opinion in Starr v.
Baca, 652 F.3d 1202 (9th Cir. 2011), where there were two
plausible explanations in contention. Id. at 1216. “If there
are two alternative explanations, one advanced by defendant
and the other advanced by plaintiff, both of which are
               IN RE: CENTURY ALUMINUM CO .                    11

plausible, plaintiff’s complaint survives a motion to dismiss
under Rule 12(b)(6).” Id. (emphasis added). Here, however,
plaintiffs’ explanation is merely possible rather than
plausible. To render their explanation plausible, plaintiffs
must do more than allege facts that are merely consistent with
both their explanation and defendants’ competing
explanation. See Iqbal, 556 U.S. at 678. The plaintiff in
Starr did so. He alleged facts which, accepted as true, tended
to exclude the possibility that the defendant was ignorant of
the unconstitutional conduct of his subordinates (the
competing alternative explanation for why the defendant
allegedly took no action to stop that misconduct). See Starr,
652 F.3d at 1216. Plaintiffs have not offered allegations of
this nature here.

    Plaintiffs argue that the allegations with respect to at least
one of the named plaintiffs, Peter Abrams, are sufficient to
meet the plausibility standard. As to Abrams, the Third
Amended Complaint alleges that he directed his broker to
purchase Century Aluminum shares in the secondary offering
and that his broker executed the purchase through Citigroup,
which at all relevant times was involved in a joint venture
with Morgan Stanley (one of the underwriters of the
secondary offering) “whereby the two entities were
indistinguishable.” Plaintiffs argue that these allegations
create a reasonable inference that at least Abrams’s shares
came from the secondary offering.

    Even accepting these allegations as true, we cannot
reasonably infer that Abrams’s shares are traceable to the
secondary offering. The allegations are again consistent with
that possibility, but they are also consistent with Citigroup
having filled the order with previously issued shares it was
holding. Absent something more, such as an allegation that
12            IN RE: CENTURY ALUMINUM CO .

Citigroup held only shares issued in the secondary offering,
these allegations are insufficient to withstand a motion to
dismiss.

    While we do not believe plaintiffs’ allegations are
adequate under Iqbal and Twombly, we agree with plaintiffs
that the district court erred by considering extrinsic evidence
when ruling on defendants’ motion to dismiss. The district
court suggested that it could consider such evidence because
plaintiffs’ failure to plead the traceability of their shares
would deprive them of “standing,” which in turn would
deprive the court of subject matter jurisdiction. Accordingly,
the court appeared to grant defendants’ motion to dismiss
under Rule 12(b)(1) of the Federal Rules of Civil Procedure,
rather than Rule 12(b)(6).

    Dismissal for lack of subject matter jurisdiction would
have been appropriate if plaintiffs had not adequately alleged
Article III standing. But that was not the case here. Plaintiffs
alleged that they purchased shares whose value had been
inflated by materially false and misleading statements in the
January 2009 prospectus supplement, and that they suffered
an injury-in-fact when the value of those shares declined after
the truth was revealed. Plaintiffs suffered that alleged injury
whether their shares came from the secondary offering or the
pool of previously issued shares, since false or misleading
statements in the prospectus supplement would likely “affect
the price of shares already issued to almost the same extent as
those of the same class about to be issued.” Barnes, 373 F.2d
at 271. Plaintiffs’ alleged injury was directly traceable to
defendants’ conduct (issuance of the allegedly false and
misleading prospectus supplement) and would be redressed
by the relief plaintiffs sought (an award of money damages).
Nothing more was needed to allege Article III standing here.
              IN RE: CENTURY ALUMINUM CO .                    13

See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 103
(1998); NECA-IBEW Health & Welfare Fund v. Goldman
Sachs & Co., 693 F.3d 145, 158 (2d Cir. 2012); Levine v.
AtriCure, Inc., 594 F. Supp. 2d 471, 476 (S.D.N.Y. 2009).

    Plaintiffs’ failure to plead the traceability of their shares
means they lack statutory standing under § 11, but failure to
allege statutory standing results in failure to state a claim on
which relief can be granted, not the absence of subject matter
jurisdiction. Leeson v. Transamerica Disability Income Plan,
671 F.3d 969, 977–78 (9th Cir. 2012); Jewel v. Nat’l Sec.
Agency, 673 F.3d 902, 907 n.4 (9th Cir. 2011). The district
court should therefore have addressed defendants’ motion to
dismiss under Rule 12(b)(6), not Rule 12(b)(1).

    Notwithstanding this error, we may affirm if dismissal
was proper under Rule 12(b)(6), see Harris v. Amgen, Inc.,
573 F.3d 728, 732 n.3 (9th Cir. 2009); Cetacean Cmty. v.
Bush, 386 F.3d 1169, 1172–73 (9th Cir. 2004), and here it
was. Even without considering the extrinsic evidence
defendants submitted, plaintiffs’ allegations fall short of what
Iqbal and Twombly require for the reasons given above. The
fact that more than 49 million shares of Century Aluminum
common stock were already in the market at the time of the
secondary offering was not alleged in plaintiffs’ complaint,
but it is a fact not subject to reasonable dispute and was
included in the January 2009 prospectus supplement, which
plaintiffs incorporated into the complaint by reference. The
district court properly took judicial notice of this document
and plaintiffs did not contest its accuracy with respect to the
number of shares outstanding at the time of the secondary
offering. That fact could therefore be considered in resolving
14           IN RE: CENTURY ALUMINUM CO .

defendants’ motion under Rule 12(b)(6). See Tellabs, Inc. v.
Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).

     AFFIRMED.
