                                RECOMMENDED FOR FULL-TEXT PUBLICATION
                                     Pursuant to Sixth Circuit Rule 206
                                             File Name: 05a0052a.06

                        UNITED STATES COURT OF APPEALS
                                         FOR THE SIXTH CIRCUIT
                                           _________________


 CITY OF MONROE EMPLOYEES RETIREMENT SYSTEM, X
 on Behalf of Itself and All Others Similarly Situated, -
                                   Plaintiff-Appellant, -
                                                          -
                                                          -
                                                              No. 03-5505

                                                          ,
            v.                                             >
                                                          -
                                                          -
 BRIDGESTONE/FIRESTONE, INC.; YOICHIRO KAIZAKI; -
 BRIDGESTONE CORPORATION;

                                                          -
                                Defendants-Appellees. -
 MASATOSHI ONO,
                                                          -
                                                          -
                                                         N
                           Appeal from the United States District Court
                        for the Middle District of Tennessee at Nashville.
                      No. 01-00017—Robert L. Echols, Chief District Judge.
                                             Argued: June 9, 2004
                                   Decided and Filed: February 4, 2005
       Before: KEITH and CLAY, Circuit Judges; OBERDORFER, Senior District Judge.*
                                             _________________
                                                   COUNSEL
ARGUED: Pamela M. Parker, LERACH, COUGHLIN, STOIA, GELLER, RUDMAN &
ROBBINS, San Diego, California, for Appellant. Thomas S. Kilbane, SQUIRE, SANDERS &
DEMPSEY, Cleveland, Ohio, James E. Gauch, JONES DAY, Washington, D.C., Erik L. Kitchen,
STEPTOE & JOHNSON, Washington, D.C., for Appellees. ON BRIEF: Pamela M. Parker,
Michael J. Dowd, William S. Lerach, LERACH, COUGHLIN, STOIA, GELLER, RUDMAN &
ROBBINS, San Diego, California, George E. Barrett, BARRETT, JOHNSTON & PARSLEY,
Nashville, Tennessee, Edward M. Gergosian, BARRACK, RODOS & BACINE, San Diego,
California, for Appellant. Thomas S. Kilbane, George M. Von Mehren, Paul B. Ockene, Frances
F. Goins, SQUIRE, SANDERS & DEMPSEY, Cleveland, Ohio, James E. Gauch, Stephen J.
Brogan, Jacqueline M. Holmes, JONES DAY, Washington, D.C., Antonia B. Ianniello, Brian M.
Heberlig, STEPTOE & JOHNSON, Washington, D.C., for Appellees.




        *
         The Honorable Louis F. Oberdorfer, Senior United States District Judge for the District of Columbia, sitting
by designation.


                                                         1
No. 03-5505                 City of Monroe v. Bridgestone Corp., et al.                                                 Page 2


                                              ______________________
                                               AMENDED OPINION
                                              ______________________
        OBERDORFER, Senior District Judge. In this appeal, we review the district court’s
dismissal with prejudice of a securities fraud class action Consolidated Complaint (“Complaint”)
filed by investors in Bridgestone Corporation (“Bridgestone”) against Bridgestone, its subsidiary
Bridgestone/Firestone, Inc. (“Firestone”), Bridgestone Chief Executive Officer (“CEO”) Yoichiro
Kaizaki, and Bridgestone Executive Vice President and Firestone CEO Masatoshi Ono. The district
court dismissed the claims against Kaizaki for lack of personal jurisdiction and dismissed the claims
against Bridgestone, Firestone and Ono for failure to state a claim upon which relief could be
granted. For the reasons stated below, we affirm in part, reverse in part, and remand.
                                                  I. BACKGROUND
        We assume the truth of the following facts for the purpose of this appeal. Unless otherwise
indicated, they are drawn from the Complaint.
        Bridgestone, a multi-national corporation with its international headquarters in Japan, is the
world’s largest tire manufacturer. Bridgestone’s stock trades in Japan on the Tokyo Stock
Exchange. Bridgestone’s stock does not trade on any American stock exchange. Accordingly,
Bridgestone is not required to register its equity securities with the United States Securities &
Exchange Commission (“SEC”). Bridgestone’s stock trades in the United States on the
over-the-counter, or “OTC,” market. The OTC market        is an American market for foreign-issued
securities not traded on any domestic stock exchange.1
       Bridgestone operates in the United States through its regional corporate headquarters in
Nashville, Tennessee, and through its wholly owned subsidiary Firestone. Firestone’s corporate
headquarters are in Nashville. Firestone’s largest tire production facility is in Decatur, Illinois.
        From 1993 to 2001, Yoichiro Kaizaki was Bridgestone’s President and CEO. In January
2001, he resigned from both positions. Kaizaki is now retired and resides in Japan. From 1993 to
October 2000, Appellee Masatoshi Ono was the Executive Vice-President of Bridgestone and CEO
of Firestone. In October 2000, Ono resigned from both positions.
         Lead Class Plaintiff City of Monroe Employees Retirement System (“the Retirement Fund”)
is, like all class members, a purchaser of Bridgestone common stock or American Depository




         1
           See the National Association of Securities Dealers, Inc. (“NASD”) website,
<http://www.nasd.com/resources/glossary>. See generally New England Health Care Employees Pension Fund v. Ernst
& Young, LLP, 336 F.3d 495, 501 (6th Cir. 2003) (“A court that is ruling on a Rule 12(b)(6) motion may consider
materials in addition to the complaint if such materials are public records or are otherwise appropriate for the taking of
judicial notice.”), cert. denied, 540 U.S. 1183 (2004); Fed. R. Evid. 201 (providing that “[a] court may take judicial
notice, whether requested or not” of a “judicially noticed fact” which “must be one not subject to reasonable dispute,”
a requirement satisfied if the fact is “(1) generally known within the territorial jurisdiction of the trial court or (2) capable
of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned”).
No. 03-5505                City of Monroe v. Bridgestone Corp., et al.                                         Page 3


Receipts2 for Bridgestone common stock between March 31, 1998 to August 31, 2000. The
allegations in the Retirement Fund’s Complaint relate to events dating back to 1978.
         In that year, Firestone’s “Firestone 500" tire was the leading steel-belted radial tire brand.
In 1978 and 1979 combined, Firestone manufactured approximately 14,000 defective Firestone 500
tires, resulting in hundreds of passenger vehicle crashes and 41 fatalities. Initially, Firestone
publicly attributed the known failures to consumers’ failure to properly inflate or take care of their
tires. Government investigators subsequently determined that Firestone had added too much of an
adhesion-boosting compound to the rubber that held the steel belts together, resulting in rubber tire
tread separating from underlying steel belts, eventually leading to the tires suddenly falling apart.
As a result, in 1979, Firestone3paid a $500,000 fine imposed by the National Highway Traffic Safety
Administration (“NHTSA”), the then-largest-ever fine imposed by the NHTSA, and instituted a
recall from consumers of 13 million Firestone 500 tires. The recall injured Firestone’s corporate
image, brand, and financial performance. App. at 143 (Complaint).
       In 1988,4 Bridgestone acquired Firestone for $2.6 billion. Upon acquiring Firestone,
Bridgestone sought to increase Firestone’s revenue by expanding its contractual relationship with
Ford Motor Company (“Ford”), a leading American automobile manufacturer.
        In 1988 and 1989, Ford was developing the Explorer, a new sport-utility vehicle. Firestone
sought to obtain the tire supply contract for the Explorer.  Towards that end, Firestone, in 1989,
submitted prototypes of its ATX tires to Ford for testing.5 An outside company tested seventeen of
the prototypes. In February 1989, the outside testing company reported that five of the seventeen
prototypes had failed due to tread separation problems under heavy loads and strenuous conditions.
         In March 1990, Ford introduced the new Explorer, equipped with Firestone ATX tires.
Between 1990 and 1993, Ford sold over 300,000 Explorers per year. By 1993, Ford had become
Firestone’s leading customer as measured by sales volume and Firestone’s financial health had
improved markedly. Firestone had been losing approximately $1 million per day as of 1989-1990,
prior to entering into the contract with Ford to outfit the Explorer with ATX tires; by 1993, Firestone
was profitable.
        Beginning in 1992, Firestone began receiving consumer complaints regarding tire tread
defects, some of which led to “rollover” accidents in which the Explorer would flip over on to its
side. Between 1992 and 1996, consumers filed 16 or more lawsuits against Bridgestone or Firestone
for rollover accidents allegedly caused by ATX tire failures on the Explorer. Between 1993 and
1994, such suits based on problems with ATX tires increased from 13% of the claims filed against
Firestone from problems in light truck tires to 43% of that category of claims. By 1999, at least 50
such suits had been filed.

         2
           An American Depository Receipt, or “ADR,” represents ownership in a security issued by a foreign company
in foreign markets. Typically, a United States depository bank has custody of the security corresponding to an ADR and
issues the ADR certificate to a United States investor. See generally Edward F. Greene, et al., U.S. Regulation of the
International Securities and Derivatives Markets, § 2.02 (2000); Fed. R. Evid. 201 (authorizing, and providing standards
for, taking judicial notice). Each Bridgestone ADR represents ten shares of Bridgestone common stock. See Joint
Appendix (“App.”) at 140.
         3
          The NHTSA is an adminstration within the United States Department of Transportation. See generally 49
U.S.C. § 105.
         4
             The Complaint does not address the years 1980--1987.
         5
          The Firestone ATX brands included the ATX, ATX II, and Wilderness AT Tires. App. at 144, 150, 154.
Unless otherwise specified, we refer to these brands collectively as the “ATX” tires.
No. 03-5505           City of Monroe v. Bridgestone Corp., et al.                              Page 4


       The Complaint alleges that by 1994, under pressure to cut its costs and increase the
productivity and production rates of its American manufacturing facilities, Firestone imposed longer
hourly work shifts to permit around-the-clock, seven days-a-week operations. In July 1994,
Firestone’s labor force, which was unionized, responded by engaging in a massive production strike.
        During the strike, Firestone continued production at its Decatur, Illinois manufacturing plant.
To do so, Firestone staffed the manufacturing floor with “untrained and inexperienced non-union
replacement workers,” along with management employees. App. at 146. During the strike, the
number of defective tires increased sharply “as supervisors and under-trained or untrained
replacement workers were called on to master highly skilled jobs to keep the Decatur plant running.”
Id. at 147.
         In 1996, Firestone management, as part of the negotiations that ended the strike, extracted
from the Firestone employees’ union concessions under which production speed increased, including
longer work shifts and retention of a seven-days-a-week production schedule. Id. at 147. In its 1996
Annual Report, Bridgestone proclaimed that “[w]e reached an agreement in 1996 with the union that
represents employees at several of our North American plants . . . The union has accepted
already-implemented adjustments in working hours that permit our plants to operate 24 hours a day,
seven days a week.” Id. at 246. After the strike, the increased level of production errors persisted
in tires made at Firestone’s Decatur plant. The Complaint alleges that production and inspection
shortcuts resulted in a sharp rise in the number of tires that were not properly manufactured, tested,
or inspected.
         In 1996, Firestone performed random quality control high-speed durability tests on various
ATX tires. In one of the sample tests, Firestone examined 129 ATX tires made at the Decatur plant.
Eighteen of those tires failed the test due to tire tread separation. In another random test of 229 ATX
tires from the Decatur plant, 31 failed. In an additional random test of 18 ATX tires, eight failed,
seven of which were from the Decatur plant. Internal Firestone documents show that the tires’ tread
separation rate was highest for tires produced at the Decatur plant from 1994 to 1996, during and
just after the strike.
        In addition to the alleged several thousand claims submitted by consumers directly to
Firestone for compensation, between 1997 and 1999, United States consumers filed 34 suits against
Bridgestone or Firestone based on deaths or injuries allegedly caused by rollovers of Explorers
equipped with Firestone ATX tires. By no later than 1997, senior Firestone officials, including
Firestone CEO and Bridgestone Executive Vice-President Ono, were tracking the claims and
lawsuits. Robert Martin, who was Firestone’s Vice President of Quality Assurance from 1997 or
earlier until his retirement in April 2000, testified in a deposition that senior Firestone executives,
Ono included, met at least quarterly from 1997 through 1999. The meetings consisted of Firestone’s
senior management group, the financial group, the quality group, and the public relations / marketing
department. Martin testified that those meetings included discussion of tread-peeling claims and
lawsuits lodged against Firestone and Bridgestone.
         Internal Firestone documents regarding property damage, injury claims, and tire performance
data, such as warranty adjustments and financial analysis of such claims, show that starting in 1996,
the ATX tires began to fail at higher rates than they had before. Similarly, a Firestone chart reveals
that from 1998 to 1999, tread separations for the Wilderness AT, one of Firestone’s ATX tire
models, increased by 194%. According to a 1999 internal Firestone report, in 1997 and 1998,
another Firestone tire model, the ATX II, accounted for the majority of the tire claims against
Firestone but for less than 10% of Firestone’s total tire production. The Complaint alleges that
Firestone “had knowledge of thousands of claims for and complaints concerning ATX tire failures,
especially ATX tires manufactured at [its] Decatur, Illinois plant during and after a bitter 1994-1996
strike, due to design and manufacturing defects which resulted in over 2,200 rollover accidents, over
No. 03-5505                 City of Monroe v. Bridgestone Corp., et al.                                                 Page 5


700 serious injuries and approximately 174 fatalities by 2000.” App. at 131 (Complaint). In
response to the lawsuits, Firestone and Bridgestone entered into settlement agreements under which
the settlement agreements with plaintiffs were sealed, the parties entered into stipulated protective
orders to conceal discovery, and Bridgestone or Firestone had returned to it “damaging documents.”
Id. at 151.
         In 1996 and 1997, State Farm Insurance Company, the largest automobile insurer in the
United States, demanded that Firestone pay the costs of automobile accidents attributable to ATX
tire failures. Without conceding (or contesting) liability, Firestone reimbursed State Farm without
public disclosure of the claims or the resulting payments. Having been paid, State Farm did not sue
Firestone, lawsuits which the Complaint alleges “would have publicized the growing problem with
the ATX tires.” Id. at 150.
       Firestone suppressed information pertaining to investigations by various governments,
domestic and foreign. In 1996, Arizona state government agencies expressed concern about the
Firestone ATX tires. Firestone sent a team of engineers to investigate and then replaced certain
Explorer tires without any public disclosure of the investigation or the replacements.
        In Venezuela, between 1990 and 1998, over forty people were killed in Explorer accidents
allegedly due to ATX tire failures. Ford demanded that Firestone alter the design of its ATX tire
being sold in Venezuela to include a nylon layer. Firestone initially did not do so. The Venezuelan
government investigated and expressed concerns to Firestone about the ATX tires. According to a
Venezuelan government document, Firestone agreed to add a nylon layer to the tires in exchange
for the Venezuelan government’s promise that it would not publicly disclose this act by Firestone.
According to the Venezuelan government document, Firestone expressed a belief that disclosure of
the layer-adding “would put in jeopardy the Bridgestone brand in Venezuela.” Id. at 152.
        In Saudi Arabia, multiple people in Ford Explorers outfitted with Firestone ATX tires also
died between 1990 and 1998 due, allegedly, to ATX tire failures. Id. at 152. Firestone’s senior
management team discussed the possibility of a formal recall of the ATX tires in the Persian Gulf
region. Firestone ultimately decided not to initiate such a recall. Id. A March 1999 internal Ford
memorandum stated, with respect to that decision, that “Firestone legal has some major reservations
about the plan to notify customers and offer them an option . . . They feel that [the National Highway
Traffic Safety Administration, or ‘NHTSA’] will have to be notified of the program, since the
product is sold in the U.S.” Id. at 153.
       Regarding the ATX-related accident data from the United States, Venezuela, and Saudi
Arabia, the Complaint alleges that Bridgestone and Firestone executives “kept the accident rate data
which they had and which showed these serious problems from safety regulators.” Id. at 151. The
Complaint alleges that their motive for doing so was “so they could report huge profits and their
executives could retain their positions of power, prestige and profit and Bridgestone’s stock and
ADRs would continue to trade at inflated, higher prices, providing the executives with direct
economic benefits based on their stock holdings and options and allowing them to personally pocket
huge bonuses based on corporate profits.” Id. at 151-52.
       The Complaint alleges a series of public, fraudulent statements by Bridgestone and Firestone,
beginning in March 1997 when Bridgestone issued its 1996 Annual Report.6 (Bridgestone typically


         6
           The Complaint relies heavily on Bridgestone’s Annual Reports for fiscal years 1996--2000. Bridgestone
attached to its motions to dismiss before the district court copies of those documents. See App. at 241-- 476.
Accordingly, we, like the district court, consider the full text of the 1996--2000 Annual Reports. See Weiner v. Klais
& Co., 108 F.3d 86, 89 (6th Cir. 1997) (“[d]ocuments that a defendant attaches to a motion to dismiss are considered
part of the pleadings if they are referred to in the plaintiff’s complaint and are central to [the plaintiff’s] claim.” (internal
No. 03-5505             City of Monroe v. Bridgestone Corp., et al.                                     Page 6


issued its annual reports for each fiscal year in March or April of the subsequent year). The 1996
Annual Report stated, in its introductory “Word from the President” section:
         We are staking our claim to global leadership on the tire industry. . . . I am
         especially satisfied with our ongoing business turnaround in the Americas, the
         biggest tire market in the world
                                              * * * * * *
         Our competitive edge in tire technology remains our highest asset. . . . Technology
         will continue to strengthen the appeal of our products and operations. This will
         include safety and improving performance.
App. at 245-47 (1996 Annual Report).
        In March 1998 came Bridgestone’s 1997 Annual Report. The accompanying letter stated:
“We are making steady progress towards leadership in the world tire industry . . . . Sales at our
subsidiary for the Americas, [Firestone], surpassed our parent-company turnover for the first time.”
App. at 289 (1997 Annual Report). Similarly, Bridgestone’s 1998 Annual Report, issued in April
1999, stated: “[t]he Americas, the largest tire market in the world, are our biggest source of
consolidated sales . . . Our global market share in original equipment tires increased further in 1998.
That growth evidences high regard among automakers for our strengths in product quality.” App.
at 342 (1998 Annual Report).
        In early February 2000, a Houston, Texas television station reported that passengers in three
Explorers equipped with ATX tires had died after suffering rollover accidents. On February 4, 2000,
Firestone issued a release stating: “We monitor the performance of all of our tires and . . . we have
full confidence in them.” App. at 167 (Complaint).
         In March 2000, Bridgestone issued its 1999 Annual Report. It stated: “We are determined
to assert a singular advantage in product technology. . . . We increased our market share in North
America in 1999 in . . . the original equipment market. Our North American operations are
approaching a market share of 20%.” App. at 384 (1999 Annual Report). The Report included in
its “Analysis of Financial Position” section a chart indicating that as a percentage of Bridgestone’s
total international net sales, its net sales in the Americas were 41.5 %,7 followed by Japan at 40.8
%, Europe 10.6% and “Others” 7.1%. See id. at 403. In the “Americas” section, under the bold,
purple-colored, large font heading of “Trends And Topics,” the Report stated that “[w]e increased
our market share in North America in 1999 . . . Demand for original equipment tires continued to
grow in 1999 in the booming North American automobile market.” Id. at 383-84. The Annual
Report 8also stated that “[o]ur multi-brand strategy--centered on the Bridgestone, Firestone, and
Dayton brands--raised our market profile further in 1999,” and that “aggressive product
development and strategic marketing have re-established the Firestone name as a vigorous brand in
premium-grade tires, as well as a large-volume, middle-market tires.” Id. at 384. It continued:
“Ford Motor Company is our oldest customer in North America . . . We also have become a major
supplier to General Motors Corporation, which recently honored us with its Supplier of the Year


quotations omitted)).
         7
         Bridgestone’s 1999 Annual Report did not break down the sales data between North and South America, nor
as between dealers in individual countries in the Americas.
         8
          Dayton was a Bridgestone brand marketed, in the words of the 1999 Annual Report, to consumers seeking
“value-oriented tires.” App. at 384.
No. 03-5505           City of Monroe v. Bridgestone Corp., et al.                               Page 7


Award for the fifth consecutive year. As a major supplier to leading European automakers, we have
developed business with the North American operations of those automakers, too. We also supply
tires to nearly all the Japanese-owned vehicle plants in North America.” Id.
        Each of the Annual Reports covering fiscal years 1996 to 1999 included financial statements
with a category labeled “Contingent Liabilities.” See App. at 278, 322, 367, 417-18 (1996 – 1999
Annual Reports, respectively). None of those reports, though, made a mention or disclosure of any
loss contingency related to any of Bridgestone or Firestone’s tire products that had previously been
sold or sent to dealers.
        Each of the Annual Reports from 1996 to 1998 included a letter from Bridgestone’s outside
auditors Asahi and Company stating that the given Annual Report was prepared “in conformity with
accounting principles generally accepted in Japan applied on a consistent basis.” App. at 280, 324,
370 (1996--1998 Annual Reports, respectively). The 1999 Annual Report contained similar
language, stating that the consolidated financial statements accompanying it were prepared “in
conformity with accounting principles and practices generally accepted in Japan . . . applied on a
consistent basis, except for changes, with which we concur, in the method of accounting for
retirement and severance benefits and pension costs . . . and for goodwill, consolidation differences,
and income taxes.” App. at 422 (1999 Annual Report). The Complaint alleges that under
International Accounting Standard § 9010.08-.09, applicable in Japan pursuant to the International
Accounting Standards Committee, “loss contingencies should be recorded if it is probable that an
asset has been impaired or a liability incurred at the balance sheet date and a reasonable estimate of
the amount of the resulting loss can be made.” App. at 178 (Complaint). Section 9010.08-09
provides further that “if either of the conditions is met and the possibility of the loss is not remote,
the existence of the contingent loss should be disclosed in the financial statements.” Id. The
Complaint alleges that under this standard, Bridgestone’s lack of recordings of a loss contingency
in the financial statements accompanying the Annual Reports for fiscal years 1996 through 1999
related to the safety and legal problems with the Firestone ATX tires--in particular a recall--were
each separately an actionable misrepresentation in violation of federal securities laws.
        Generally Accepted Accounting Principles, or “GAAP,” are a series of general principles
followed by accountants in a given country or geographic area. Bridgestone’s 1999 Annual Report
stated that “[t]he Japanese consolidated financial statements have been prepared in accordance with
the provisions set forth in the . . . accounting principles and practices generally accepted in Japan
(‘Japanese GAAP’).” App. at 413 (1999 Annual Report). It represented that the “accompanying
financial statements include the accounts of certain foreign subsidiaries, which are based upon U.S.
GAAP, representing 45% of total consolidated assets and 51% of total consolidated revenues in
1999.” Id. Bridgestone and Firestone do not dispute that this statement was a reference to, among
other non-Japanese Bridgestone subsidiaries, Firestone. United States GAAP, as set forth in
Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 5
(“FASB 5"), “requires that loss be accrued whenever it is probable a loss has been incurred or an
asset impaired and the amount of the loss can be reasonably estimated” and that “[i]f the loss is at
least reasonably possible but no reasonable estimate can be made, the contingency at a minimum
should be disclosed.” App. at 178 (Complaint). The 1999 Annual Report stated that Japanese
GAAP “are different in certain material respects (e.g. topics addressed, available alternatives,
recognition criteria, measurement practices, presentation formats and disclosures, etc.), as compared
to accounting and reporting standards generally accepted in the U.S. (‘U.S.GAAP’).” App. at 413
(1999 Annual Report). At note 11, the Report included “a supplemental discussion of the
accounting differences,” id., and listed a number of “differences between Japanese and U.S. GAAP,”
id. at 421. Note 11 did not include a reference to FASB 5 as one of the differences between U.S.
and Japanese GAAP. See id. The Complaint alleges that under FASB 5, Bridgestone’s failure to
either accrue for a loss or disclose both the ongoing losses from claims due to settlement and the
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                           Page 8


contingency of a recall or a major loss related to the impairment of the Firestone tires was an
actionable misrepresentation.
        In July 2000, after consumers filed two lawsuits against Firestone alleging that ATX tire
tread separation caused Ford Explorers to roll over and cause fatalities, the Wall Street Journal asked
Firestone to comment. A resulting July 26, 2000 Wall Street Journal article quoted a Firestone
representative as stating that Firestone had “full confidence” in its tires. App. at 170-71
(Complaint). Also in July 2000, several safety groups urged Ford to recall all Explorers with
Firestone ATX tires on them. On August 1, 2000, Firestone issued a written statement that “[w]e
continually monitor the performance of all our tire lines, and the objective data clearly reinforces
our belief that these are high-quality, safe tires.” Id. In that release, Firestone further stated that
“[p]roperly inflated and maintained Firestone ATX . . . tires are among the safest tires on the road
today.” Id. On August 3, 2000, the New York Times published an article about the Explorer and
Firestone’s ATX tires, suggesting problems with the tires. The article reported that “Firestone9
denied the charges. . . . ‘These are safe tires,’ said . . . a [Firestone] spokeswoman.” Id. at 171.
The Complaint alleges that these public statements by Firestone in July 2000 and August 2000 were
misrepresentations in violation of federal securities laws.
       On August 9, 2000, Firestone announced that effective that day, it was beginning a formal,
voluntary safety recall. The recall included 6.5 million Firestone ATX tires on Explorers already
sold and an offer to replace all Firestone ATX tires on unsold Explorers in dealers’ inventory at that
time. The recall specifically designated ATX tires made at Firestone’s Decatur plant.
       In the months immediately following the recall, Firestone and Bridgestone suffered major
upheaval. In October 2000, Ono resigned as Executive Vice President of Bridgestone and Chief
Executive of Firestone. In January 2001, Kaizaki resigned as Bridgestone’s President and Chief
Executive Officer. Saudi Arabia banned the importation of ATX tires.
                                                                 10
                                                                      The two companies’ images
were subjected to an array of public condemnation  by regulators,   congressional representatives
from both major American political parties,11 and industry analysts.12

         9
          The New York Times article identified the name of the Firestone spokesperson. Because that person is not
a defendant in this case, and because neither the quotation’s accuracy nor the spokesperson’s job description are
disputed, we need not repeat it here.
         10
             See, e.g., Jennifer Hoyt, Agency Seeks Broader Authority to Probe Vehicle Safety Breaches, Houston
Chronicle, Sept. 13, 2000, at 4, available at 2000 WL 24511175 (“NHTSA Administrator Sue Bailey said she thought
the problem was with tires, but that the agency was still investigating the vehicle-tire interaction.”); Nedra Pickler,
Hearings Scheduled on Tire Case, Associated Press, Sept. 14, 2000, available at 2000 WL 26675534 (“The National
Highway Traffic Safety Administration has said it is investigating 88 deaths and more than 250 injuries over the past
decade involving Firestone tires. The Wall Street Journal reported Thursday that five more deaths have occurred since
the recall of 6.5 million ATX, ATX-II and Wilderness AT tires was announced”); App. at 136 (quoting a statement made
August 30, 2000 by Samuel Ruh Rios, President of Indecu, the Venezuelan safety agency, that Bridgestone and Ford
had “met to plan ways out of a situation that was affecting their commercial interests, at the price of causing damage,
destruction, and death. . . . Both companies hid information and this caused many accidents”); id. at 172 (quoting an
August 31, 2000 Reuters Report as stating that “Venezuela’s consumer protection agency recommended . . . that criminal
charges be filed against Bridgestone Corp . . . over defects linked to at least 46 deaths in Venezuelan road accidents”).
We take judicial notice of the fact that the media articles cited above were published, without reaching any conclusions
about their truth. See generally Fed. R. Evid. 201.
         11
            See, e.g., Hoyt, Agency Seeks Broader Authority, 2000 WL 24511175 (“Sens. Dianne Feinstein . . . and Herb
Kohl [ ] announced that they would introduce a bill to increase civil penalties for withholding information from NHTSA.
Their bill also would set criminal penalties for companies that knowingly allow defective vehicles or parts to be
distributed if death or injury results.”); App. at 172-73 (Complaint, quoting statement by United States Representative
Heather Wilson, in response to claims by senior Firestone executives of lack of knowledge of fatal defects of the ATX
tires: ‘”That’s rubbish . . . You knew a long time ago.’”); id. at 173 (quoting Representative Billy Tauzin as stating
through his spokesman, after a congressional hearing on the rollover accidents: ‘”This latest information only confirms
No. 03-5505                City of Monroe v. Bridgestone Corp., et al.                                                Page 9


         Most significant was the apparent financial impact of the recall. Firestone experienced a net
$510 million loss for the 2000 fiscal year and Bridgestone’ total profits decreased from about $764
million in 1999 to about $153 million in 2000. Between August 8, the day before the recall, and
September 21, 2000, Bridgestone’s common stock share price on the Tokyo stock exchange dropped
from over $2,200.00 to less than $1,400.00. Between those same dates, its ADR share price dropped
from over $202.00 to less than $122.00. Bridgestone’s earnings for fiscal year 2000 were its lowest
in a decade. In the 2000 Annual Report, then-newly installed Bridgestone CEO Shigeo Watanabe
stated that “[n]et earnings declined 80% in the past year . . . That decline is attributable mainly to
a special charge in connection with the tire recall in the United States. We have recorded a charge
at [Firestone] of $754 million [ ] for costs already incurred in replacing the recalled tires and for
potential liabilities and other legal costs in connection with the problems that led to the tire
recall. . . . Fallout from the recall will remain a marketing    issue for us in North America and
elsewhere in 2001.” Id. at 432 (2000 Annual Report).13
        In the wake of the recall, Firestone immediately launched a four-month internal investigation
culminating in a report released publicly in December 2000. See App. at 174 (Complaint). The
report found that two problems were central to the ATX tires’ repeated failures. First was a problem
with the tires’”shoulder pocket,” an area from the sidewall to the tread designed to give traction in
snow and off-road driving conditions. In many of the ATX tires, the shoulder pocket was made with
an angle steeper than is proper such that the pocket cracked on the inside. Particularly in those tires
produced at the Decatur plant, the cracking was prone to spread from the pocket to the point where
two belts of rubber-coated steel fibers form the tires’ core. Id. Second, noted the report, the
materials used at the Decatur plant produced tires less likely to stay intact. To make a tire, the
various layers are heated and squeezed together by fusion. The Decatur plant produced rubber
pellets while the other plants used rubber sheets. In each case, the pellets or sheets were sprayed
with lubricant to keep the rubber from sticking together in large globules. Lubricant makes tires
stick together less. Because the pellets had a larger surface area than the sheets, the pellets in the
Decatur plant were exposed to two or three times more lubricant than the sheets from other plants.
After Firestone’s internal report was issued, Firestone began shipping rubber sheets from other
plants to the Decatur plant to avoid this problem. Id.
        On May 11, 2001, the Retirement Fund (as lead named plaintiff for the Class) filed the
instant Consolidated Class Action Complaint in the United States District Court for the Middle
District of Tennessee alleging violations of §§ 10(b) and 20(a) of the Securities Exchange Act of
1934, codified at 15 U.S.C. § 78j(b), and Securities Exchange Commission Rule 10b-5, codified at




our suspicion that [Bridgestone and Firestone] knew a hell of a lot more than they’re willing to admit.’”).
         12
            See, e.g., App. at 9 (Complaint) (quoting David Meyers, Associate Professor of Management at Akron
University, as stating ‘”I’m on record as saying that the Firestone brand name is toast. . . . That company’s in trouble,
and that’s not news. I attended the congressional hearings at which company executives testified, and those people aren’t
believable. I wouldn’t trust them with my kids[‘] piggy bank’”) (internal parentheses omitted); id. (quoting Columbia
University Law School Dean and Professor David Leebron as stating, on January 21, 2001: ‘”This is Firestone’s
Pinto.’”).
         13
             The recall’s public policy impact has been evident as well. The public controversy surrounding the safety
issues that led to the recall has in important ways influenced the policy debate in the four years since the recall. See, e.g.,
Danny Hakim, U.S. Regulators Release Vehicle Rollover Data, N.Y. Times, Aug. 10, 2004, at C1, available at 2004
WLNR 5561590 (“The government rollover tests began this year at the direction of Congress, which ordered the agency
to develop a track test in the wake of a series of fatal rollover crashes in the late 1990's involving Ford Explorers
equipped with Firestone tires.”).
No. 03-5505              City of Monroe v. Bridgestone Corp., et al.                                        Page 10


17 C.F.R. § 240.14 See App. at 130-186. The four defendants-- Bridgestone, Firestone, Kaizaki, and
Ono--moved to dismiss the Complaint on a variety of grounds. See App. at 191-526.
        On September 30, 2002, the district court issued a lengthy memorandum opinion and
accompanying order dismissing the Complaint. See App. at 975-1038. Two of the district court’s
rulings are relevant in this appeal, each of which we describe in further detail within our analysis
in Part II. First, the district court granted Kaizaki’s motion to dismiss for lack of jurisdiction.
Second, the district court granted--as to the remaining three defendants, Bridgestone, Firestone, and
Ono--their motions to dismiss with prejudice all counts for failure to state a claim upon which relief
can be granted under Federal Rule of Civil Procedure 12(b)(6).
         The Retirement Fund appeals.
                                               II. DISCUSSION
        On appeal, our analysis proceeds in three parts. Part II(A) articulates the applicable standards
of review. Part II(B) assesses whether the district court erred in granting Kaizaki’s motion to
dismiss for lack of personal jurisdiction and concludes that it did not. Part II(C) addresses the merits
and divides into two sections. Part II(C)(1) discusses whether the Complaint adequately pleaded
any actionable statements and concludes, contrary to the district court, that one statement by
Firestone and two statements by Bridgestone were actionable but, like the district court, that the
remaining alleged statements in the Complaint were not actionable. Part II(C)(2) analyzes whether,
for those three actionable statements, the Complaint adequately pled scienter as against Bridgestone,
Firestone and Ono. It concludes that the Complaint did so for at least one statement with respect to
each of the two corporate defendants, but did not do so with respect to Ono.
A.       Standards of Review
         We review de novo the district court’s dismissal of the counts against Kaizaki for lack of
personal jurisdiction. See Nationwide Mut. Ins. Co. v. Tryg Int’l Ins. Co., 91 F.3d 790, 793 (6th Cir.
1996). We also review de novo the district court’s dismissal of the securities fraud complaint
against Bridgestone, Firestone, and Ono for failure to state a claim upon which relief can be granted.
PR Diamonds, Inc. v. Chandler, 364 F.3d 671, 680 (6th Cir. 2004). In performing that review, we,
like the district court, “must accept as true ‘well-pleaded facts’ set forth in the complaint.” Id.
(quoting Morgan v. Church’s Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987)). The Retirement Fund
“need only give a ‘fair notice of what the plaintiff’s claim is and the grounds upon which it rests.’”
Lawler v. Marshall, 898 F.2d 1196, 1199 (6th Cir. 1990) (quoting Conley v. Gibson, 355 U.S. 41,
47 (1957)). Rule 12(b)(6) allows a dismissal for failure to state a claim only when “it appears
beyond a doubt that the plaintiff can prove no set of facts in support of his claims which would
entitle him to relief.” Id. “What Rule 12(b)(6) does not countenance are dismissals based on a
judge’s disbelief of a complaint’s factual allegations.” Lawler, 898 F.2d at 1199 (quoting Neitzke
v. Williams, 490 U.S. 319, 328 (1989)). Construing the Complaint in a light most favorable to the
Retirement Fund, we must determine whether it “undoubtedly can prove no set of facts in support
of [its] claims that would entitle [it] to relief.” PR Diamonds, 364 F.3d at 680. That said, we do not
accept as true “the bare assertion of legal conclusions,” In re Sofamor Danek Group, Inc., 123 F.3d
394, 400 (6th Cir. 1997) (internal quotation omitted), nor do we “accept as true legal conclusions
or unwarranted factual inferences,” id. (quoting Morgan, 829 F.2d at 12). Further, we may affirm


         14
             On January 4, 2001, the Retirement Fund filed a class action against the now defendant-appellees in the
United States District Court for the Middle District of Tennessee, alleging securities fraud. On January 22, 2001,
plaintiff Patricia Ziemer filed a similar Complaint in that same court against the same defendants. On April 11, 2001,
the district court consolidated the two actions into the instant case.
No. 03-5505                City of Monroe v. Bridgestone Corp., et al.                                           Page 11


the district court on any ground supported by the record. In re Comshare Inc. Sec. Litig., 183 F.3d
542, 547-48 (6th Cir. 1999).
B.       Personal Jurisdiction
         The Due Process Clause of the United States Constitution “permits the exercise of both
general and specific jurisdiction.” Aristech Chem. Int’l Ltd. v. Acrylic Fabricators, Ltd., 138 F.3d
624, 627 (6th Cir. 1998). “General jurisdiction exists when a defendant has continuous and
systematic contacts with the forum state sufficient to justify the state’s exercise of judicial power
with respect to any and all claims.” Id. (internal quotation omitted). Kaizaki lives today in Japan
and at all relevant times lived and worked in Japan. The Retirement Fund does not argue that the
district court could assert general jurisdiction over him. Rather, it argues that the district court
should have exercised specific jurisdiction over him, which, in contrast, “subjects the defendant to
‘suit in the forum state only on claims that arise out of or relate to a defendant’s contacts with the
forum.’” Id. at 627-28 (quoting Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414
& n. 8 (1984) (internal quotations in original omitted)).
         Whether specific jurisdiction exists over Kaizaki depends on three criteria. Id. at 628. First,
he must have purposefully availed himself of the privilege of acting in the United States or have
purposefully caused a consequence in the United States. Id. Second, the cause of action must arise
from his actions in the United States. Id. Finally, the exercise of jurisdiction by a court within the
United States15 over Kaizaki must be reasonable under the circumstances of this case. Id. The
district court held that the Retirement Fund’s Complaint failed all three prongs. See App. at
997-1002. We must affirm the district court’s holding if we conclude that any one of the three
prongs are not satisfied. See, e.g., LAK, Inc. v. Deer Creek Enters., 885 F.2d 1293, 1303 (6th Cir.
1989) (“[E]ach criterion represents an independent requirement, and failure to meet any of the three
means that personal jurisdiction may not be invoked.”) (emphasis added).
        Upon review, we conclude, under the circumstances of this case, that the third,
“reasonableness” prong tips against exercising jurisdiction against Kaizaki. Whether the exercise
of jurisdiction over a foreign defendant is reasonable is a function of balancing three factors: “the
burden on the defendant, the interests of the forum State, and the plaintiff’s interest in obtaining
relief.” Asahi Metal Indus. v. Superior Ct. of Cal., 480 U.S. 102, 113 (1987).
        Applying that balancing test to this case, there is clearly potential, should this suit go
forward, for some substantial burden on Kaizaki. The Supreme Court has cautioned that “[g]reat
care and reserve should be exercised when extending our notions of personal jurisdiction into the
international field,’” id. at 115 (internal quotations omitted) (emphasis added), and that “the unique
burdens placed upon one who must defend oneself in a foreign legal system should have significant
weight in assessing the reasonableness of stretching the long arm of personal jurisdiction over
national borders,” id. at 114. In performing this balancing of interests, we keep an eye towards “the
interstate judicial system’s interest” in judicial economy and “the shared interest of the several States
in furthering fundamental substantive social policies.” Id. at 113. In Aristech, decided in 1998, this
Court upheld the reasonableness of exercising jurisdiction over a Canadian executive by reasoning,
in part, that “a Canadian defendant . . . bears a substantially lighter burden than does a Japanese
defendant – or for that matter, most other foreign defendants,” since “only a short plane flight
separates Ontario from Kentucky.” 138 F.3d at 628 (emphasis added). “This is not a case,” the

         15
            The Securities Exchange Act includes a nationwide service-of-process provision. See 15 U.S.C. § 78aa.
Therefore, the “forum” for the purposes of personal jurisdiction analysis in the Kazaiki’s context is the United States,
rather than any particular federal judicial district within the United States. See United Liberty Life Ins. Co. v. Ryan, 985
F.2d 1320, 1330 (6th Cir. 1993) (holding that 15 U.S.C. § 78aa “confers personal jurisdiction in any federal district court
over any defendant with minimum contacts to the United States”).
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                          Page 12


court in Aristech, “where the exercise of jurisdiction requires a company to travel from the other side
of the world or even across the Atlantic [ocean].” Id. (internal citations omitted). In contrast, of
course, Kaizaki is living in Japan, and is a retired senior citizen at that. Though, presumably, a
deposition or other proceedings involving Kaizaki’s participation could be conducted by telephone
or by counsel in Japan, circumstances might necessitate his traveling to the United States for a trial
or other litigation-related purpose.
        Turning to the other side of the scale, the countervailing interests of the United States as the
forum and the class plaintiffs in the instant suit being prosecuted against Kaizaki are relatively light.
The key defendants, we think, are Bridgestone and Firestone, the two corporate entities with
substantial ongoing business affairs in the United States. The court’s16personal jurisdiction over the
corporate defendants, and indeed over defendant Ono, is conceded. Thus, the marginal addition
of Kaizaki would add little or nothing to the potential recovery should the plaintiffs ultimately
prevail on the merits and be awarded damages, for which Kaizaki would be at most “liable jointly
and severally,” but not separately liable. 15 U.S.C. § 78t(a). We thus agree with the district court’s
conclusion that “[b]ecause Bridgestone, Firestone and Ono are subject to jurisdiction, no actual
violation of securities laws would go unpunished, and any [recovery] is highly unlikely to be
affected by Kaizaki’s dismissal.” App. at 1001. Though the United States and the class plaintiffs
of course have an interest in the enforcement of federal securities laws, those interests as against
Kaizaki are tempered in the circumstances of this case. We find no error in the district court’s
conclusion that exercise of jurisdiction over Kaizaki in the circumstances of this case was not
reasonable. Thus, even assuming, without deciding, that the first two prongs of the three-part
specific jurisdiction test are satisfied, the district court did not err in granting Kaizaki’s motion to
dismiss for want of personal jurisdiction on the grounds that the third “reasonableness” prong was
not satisfied.
         The Retirement Fund suggests that even if we conclude that the circumstances of this case
do not satisfy the test for personal jurisdiction over foreign defendants, its “allegations of control
person liability” nonetheless “provide personal jurisdiction over Kaizaki.” Appellant’s Br. at 53.
The notion of a control person derives from § 20(a) of the Securities Exchange Act, which attaches
liability to “[e]very person who, directly or indirectly, controls any person liable under any provision
of this chapter or of any rule or regulation thereunder . . . unless the controlling person acted in good
faith and did not directly or indirectly induce the act or acts constituting the violation or cause of
action.” 15 U.S.C. § 78t(a). The term “control” in this context is defined by the code of federal
regulations as “the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting securities, by
contract, or otherwise.” 17 C.F.R. § 230.405.
        There is a division of judicial authority as to whether showing that a defendant is a
controlling person within the meaning of these provisions (and thereby potentially liable under the
securities law to the same extent as the controlled entity) is automatically sufficient to bring that
defendant within the personal jurisdiction of the court merely because the controlled entity itself has
the requisite jurisdictional contacts. See, e.g., In re Baan Co. Sec. Litig., 245 F. Supp. 2d 117,
128-29 (D.D.C.2003) (collecting cases). This court has not apparently addressed the issue.
         The Retirement Fund’s theory is supported most prominently by San Mateo County Transit
Dist. v. Dearman, Fitzgerald, & Roberts, Inc., 979 F.2d 1356 (9th Cir. 1992). That decision held
that jurisdiction is appropriate if the plaintiff makes only “a non-frivolous allegation that the
defendant controlled a person liable for the fraud.” Id. at 1358; see also McNamara v. Bre-X


         16
           Bridgestone did not cross-appeal the denial of its motion to dismiss for lack of personal jurisdiction. Neither
Ono or Firestone have contested personal jurisdiction.
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                          Page 13


Minerals Ltd., 46 F. Supp. 2d 628, 636-37 (E. D. Tex. 1999) (adopting a rule that “the Court has
personal jurisdiction over any Defendant as to which the Plaintiffs make a prima facie showing of
control person liability.”). Kaizaki responds that “[a] claim of statutory liability . . . is no substitute
for establishing personal jurisdiction.” Appellees Bridgestone and Kaizaki’s Br. at 46 n.18 &
accompanying text. We agree. “[L]iability is not to be conflated with amenability to suit in a
particular forum. Personal jurisdiction has constitutional dimensions, and regardless of policy goals,
Congress cannot override the due process clause, the source of protection for non-resident
defendants.” AT&T Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 590-591 (9th Cir. 1996)
(internal citations omitted). The broad understanding of control person liability adopted by the
securities laws cannot on its own support personal jurisdiction. This approach would, as one
persuasive opinion stated, “impermissibly conflate[ ] statutory liability with the Constitution’s
command that the exercise of personal jurisdiction must be fundamentally fair.” In re Baan, 245
F. Supp. 2d at 129 (Huvelle, J.). Though they may involve a similar contact-based analysis,
ultimately, the two inquiries must be distinct: “control person liability under the securities laws is
not germane to the issue of personal jurisdiction . . . .” FDIC v. Milken, 781 F. Supp. 226, 234
(S.D.N.Y. 1991) (Pollak, J.).
        We thus reject the Retirement Fund’s invitation to substitute our analysis of the securities
laws’ substantive bases for liability for the required, due-process based personal jurisdiction
analysis, and therefore decline to address Kaizaki’s potential liability as a control person. For the
foregoing reasons, we hold that the district court did not err in granting Kaizaki’s motion to dismiss
for want of personal jurisdiction. We turn then to the merits of the Complaint and analyze whether
the district court erred in granting the motion to dismiss as against the other three defendants on the
grounds that it failed to state a claim upon which relief could be granted.
C.       Merits
        Since their enactment in response to the stock market crash of 1929, the “basic policies
underlying securities regulation” have been that “‘[t]here cannot be honest markets without honest
publicity’” because “‘[m]anipulation and dishonest practices of the market place thrive upon
mystery and secrecy.’” Helwig, 251 F.3d at 556 (quoting Basic Inc. v. Levinson, 485 U.S. 224, 230
(1988) (quoting H.R. Rep. No. 1383, at 11 (1934))). The Supreme Court “‘repeatedly has described
the fundamental purpose of the Act as implementing a philosophy of full disclosure,’” Helwig, 251
F.3d at 556 (quoting Basic, 485 U.S. at 230)), “to substitute a philosophy of full disclosure for the
philosophy of caveat emptor,” Affiliated Ute Citizens v. United States, 406 U.S. 128, 151 (1972)
(quoting SEC v. Capital Gains Research Bureau, 375 U.S. 180, 186 (1963)). Generally, federal
securities law prohibits “fraudulent, material misstatements or omissions in connection with the sale
or purchase of a security.” Morse v. McWhorter, 290 F.3d 795, 798 (6th Cir. 2002). Specifically,
in order to state a claim under Section 10(b) of the Securities Exchange Act of 1934, or under SEC
Rule 10b-5, a plaintiff must allege: (1) a misrepresentation or omission; (2) of a material fact that
the defendant had a duty to disclose; (3) made with scienter; (4) justifiably relied on by plaintiffs;
and (5) proximately causing them injury. Helwig v. Vencor, Inc., 251 F.3d 540, 554 (6th Cir. 2001)
(en banc) (citing Aschinger v. Columbus Showcase Co., 934 F.2d 1402, 1409 (6th Cir. 1991)); see
also Sofamor Danek, 123 F.3d at 400.17 A statement is said to be “actionable” when it satisfies the
first two of these requirements, i.e., it is a misrepresentation or omission of a material fact that the
defendant had a duty to disclose. See, e.g., Nathenson v. Zonagen Inc., 267 F.3d 400, 415 (5th Cir.
2001); Castellano v. Young & Rubicam, Inc., 257 F.3d 171, 179 (2d Cir. 2001).

         17
            The Complaint also alleges liability against Kaizaki and Ono under § 20(a) of the Securities Exchange Act
of 1934, 15 U.S.C. § 78t(a), which provides for liability of controlling persons. As discussed above, we need not analyze
the merits of the § 20(a) claim against Kaizaki because we resolve those claims on the jurisdictional issue. And, as
discussed below, we need not resolve the “merits” of the control person liability theory against Ono beyond our
conclusion that the Complaint does not adequately plead scienter against him.
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                         Page 14


        The district court held that the Retirement Fund’s Complaint failed to plead adequately any
actionable statements for any allegedly fraudulent statements. It held, in the alternative, that the
Retirement Fund failed to plead scienter adequately. The district court did not address the remaining
two elements of the claim: reliance and proximate cause. As detailed in the discussion that follows,
the district court’s merits holdings were in part erroneous.
         1.       Actionable Statements
        In order to be actionable, a misrepresentation or omission must pertain to material
information that the defendant had a duty to disclose, two significant limitations to the general
policy of disclosure. See, e.g., Basic, 485 U.S. at 238 (“[I]n order to prevail on a Rule 10b-5 claim,
a plaintiff must show that the statements were misleading as to a material fact. It is not enough that
a statement is false or incomplete, if the misrepresented fact is otherwise insignificant.”) (emphasis
in original omitted); In Re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1432 (3d Cir. 1997)
(“[T]here is no general duty on the part of a company to provide the public with all material
information.”). As this Court has recognized, this set of requirements preserves the healthy limits
on a public corporation’s “duty to disclose all information[,] even colorably material,” because
corporations might otherwise “face potential second-guessing in a subsequent disclosure suit,” a
regime that would threaten to “deluge investors with marginally useful information, and would
damage corporations’ legitimate needs to keep some information non-public.” Sofamor Danek, 123
F.3d at 403 (internal quotations and citations omitted). A duty to affirmatively disclose “may arise
when there is insider trading, a statute requiring disclosure,” or, as relevant to this case, “an
inaccurate, incomplete or misleading prior disclosure.” In re Digital Island Sec. Litig., 357 F.3d
322, 329 n.10 (3d Cir. 2004) (internal quotations omitted).
       As for materiality, whether or not a statement is material turns on “a fact-intensive test.”
Helwig, 251 F.3d at 555.18 “‘Materiality depends on the significance the reasonable investor would
place on the withheld or misrepresented information.’” Id. (quoting Basic, 485 U.S. at 240). That
is, would the information, had it been presented accurately, have “‘significantly altered the ‘total
mix’ of information made available?’” Id. at 563 (quoting Basic, 485 U.S. at 231-32).
       In this vein, this Court has distinguished between “hard” and “soft” information.” Sofamor
Danek, 123 F.3d at 401-02. “Hard information is typically historical information or other factual
information that is objectively verifiable.” Id. at 401 (internal quotations omitted). Publicly
disclosed, hard information is actionable if false and material.
        “Soft information,” on the other hand, includes “predictions and matter of opinions.” Id. at
402. The failure to disclose soft information is actionable “‘only if [it is] . . . virtually as certain as
hard facts.’” Starkman v. Marathon Oil Co., 772 F.2d 231, 241 (6th Cir. 1985)). Thus, federal
courts “everywhere ‘have demonstrated a willingness to find immaterial as a matter of law certain
kinds of rosy affirmation heard from corporate managers and numbingly familiar to the
marketplace--loosely optimistic statements that are so vague, [and] so lacking in specificity, . . . that
no reasonable investor could find them important to the total mix of information available.’” In re
Ford Motor Co. Sec. Litig., 381 F.3d 563, 570-71 (6th Cir. 2004) (quoting Shaw v. Digital Equip.
Corp., 82 F.3d 1194, 1217 (1st Cir. 1996)).
        However, opinions may be deemed false or misleading under the securities laws if proof of
their falsity can be established “through the orthodox evidentiary process.” Virginia Bankshares,
Inc. v. Sandberg, 501 U.S. 1083, 1090, 1091-93 (1991). For such statements, ‘”a company is

         18
            Cf. R. Gregory Roussel, Securities Fraud or Mere Puffery: Refinement of the Corporate Puffery Defense,
51 Vand. L. Rev. 1049, 1064-66 (1998) (discussing the virtues of the “contextual standard,” as distinguished from rigid,
bright-line rules, in assessing whether a statement should be classified as puffery).
No. 03-5505           City of Monroe v. Bridgestone Corp., et al.                               Page 15


generally under no obligation to disclose its expectations for the future to the investing public.’”
Helwig, 251 F.3d at 564 (quoting, with approval, Kowal v. MCI Communications Corp., 16 F.3d
1271, 1277 (D. C. Cir. 1994)). If a company “chooses to volunteer such information,” though, “its
disclosure must be full and fair, and courts may conclude that the company was obliged to disclose
additional material facts . . . to the extent that the volunteered disclosure was misleading . . . .” Id.
(internal quotations omitted). Our securities laws therefore “require an actor to ‘provide complete
and non-misleading information with respect to the subjects on which he undertakes to speak.’”
Helwig, 251 F.3d at 561 (quoting Rubin v. Schottenstein, 143 F.3d 263, 268 (6th Cir. 1998) (en
banc)).
        The question thus is not whether a [defendant’s] silence can give rise to liability, but whether
        liability may flow from his decision to speak . . . concerning material details . . . , without
        revealing certain additional known facts necessary to make his statements not misleading.
        This question is answered by the text of [SEC] Rule 10b-5(b) itself: it is unlawful for any
        person to “omit to state a material fact necessary in order to make the statements made, in
        the light of the circumstances under which they were made, not misleading . . . .”
Rubin, 143 F.3d at 267 (quoting 17 C.F.R. § 240.10b-5(b)).
       With these standards in mind, we consider whether the plaintiffs have alleged any actionable
statements. The alleged statements fall into two categories: (1) public statements by Bridgestone
and Firestone affirming the safety or quality of Firestone’s tires; and (2) allegedly false
representations made by Bridgestone in the financial statements accompanying its Annual Reports.
                a.      Statements about the Quality or Safety of Firestone’s ATX Tires
         The Retirement Fund argues that a number of public statements by Bridgestone and Firestone
about the quality or safety of Firestone’s ATX times (summarized in Part I) are actionable because
they were made “while in possession of specific, adverse information undermining the truth of those
statements,” Appellant’s Br. at 40, thereby engendering a duty to disclose known adverse
information about the safety of Firestone’s tires. These statements include: (1) Bridgestone’s 1996
Annual Report statement that it sold “the best tires in the world,” its publicly distributed written
statement in “late 1996" that it had “no reason to believe there is anything wrong with [its ATX
tires]”; (2) Bridgestone’s 1997 Annual Report statement that its products demonstrated “global
consistent quality”; (3) Bridgestone’s 1997 Annual Report statement that “[r]igorous testing under
diverse conditions at our proving grounds around the world helps ensure reliable quality for original
equipment customers”; (4) Bridgestone’s 1998 Annual Report statement that sales success in North
American was due to “high regard among automakers for our strengths in product quality;”
(5) Bridgestone’s 1999 Annual Report statement that “[w]e have built a premium-quality for . . .
Firestone tires” and that “aggressive product development” had “re-established the Firestone name
as a vigorous brand in premium-grade tires;” (6) Firestone’s statements in February 2000 that it had
“full confidence” in the ATX tires and that “[o]ur experience with Radial ATX indicates high
consumer satisfaction with the quality and reliability of these tires”; (7) Firestone’s statement in July
2000 that it had “full confidence” in its tires; and (8) Firestone’s statement on August 1, 2000 that
“[w]e continually monitor the performance of all our tire lines, and the objective data clearly
reinforces our belief that these are high-quality, safe tires” and that “[t]hese are safe tires.”
        As to Bridgestone’s statements, the district court concluded that they were “statements of
self-praise and confidence in its future,” which “constituted immaterial opinions.” App. at 1019.
Similarly, as to Firestone’s statements, the district court held that they were “of general optimism
and in defense of its products . . . [and] immaterial as a matter of law.” Id. at 1029. Accordingly,
the district court held that all of these statements were non-actionable.
No. 03-5505            City of Monroe v. Bridgestone Corp., et al.                               Page 16


        On appeal, Bridgestone and Firestone likewise argue that these statements were immaterial
puffery. With one important exception – the statement in Firestone’s August 1, 2000 concerning
“objective data” – we agree that the statements recited above are best characterized as loosely
optimistic statements insufficiently specific for a reasonable investor to “find them important to the
total mix of information available.” In re Ford, 381 F.3d at 570-71 (quoting Shaw, 82 F.3d at
1217)). These statements, both on their own terms and in context, lacked a standard against which
a reasonable investor could expect them to be pegged; such statements describing a product in terms
of “quality” or “best” or benefitting from “aggressive marketing” are too squishy, too untethered to
anything measurable, to communicate anything that a reasonable person would deem important to
a securities investment decision. The statements are analogous to those deemed immaterial by a
broad spectrum of federal courts. See, e.g., Longman v. Food Lion, Inc., 197 F.3d 675, 684 & n.2
(4th Cir. 1999) (concluding that the statements that “Food Lion is one of the best-managed high
growth operators in the food retailing industry” and that it provided its employees with “some of the
best benefits in the supermarket industry” were “immaterial puffery”); Grossman v. Novell, Inc.,120
F.3d 1112, 1121 (10th Cir. 1997) (holding that a company’s statement that it had achieved
“substantial success” in integrating the sales force of two merged companies was “an immaterial
statement[] of corporate optimism”); San Leandro Emergency Med. Group Profit Sharing Plan v.
Philip Morris Cos., 75 F.3d 801, 811 (2d Cir. 1996) (holding that a company’s statements that it was
“optimistic” about its earnings and “should deliver income growth consistent with its historically
superior performance” was non-actionable “puffery”); In re Cybershop.com Sec. Litig., 189 F. Supp.
2d 214, 229 & 232 (D.N.J. 2002) (holding that the statement that “[w]e are well prepared for the
holiday season and believe it will clearly differentiate us as the leader in our segment of online
retail” was not material); In re Peritus Software Servs., Inc. Sec. Litig. , 52 F. Supp. 2d 211, 220 (D.
Mass. 1999) (holding that the statement that company’s product was enjoying “unprecedented
market demand” was non-actionable puffery). We conclude that the district court did not err in
dismissing the claims based on these statements.
         Firestone’s August 1, 2000 Press Release: “Objective Data” Statement. We reach a
different conclusion, however, with respect to the statement in Firestone’s August 1, 2000 press
release. In that press release, Firestone stated: “[w]e continually monitor the performance of all our
tire lines, and the objective data clearly reinforces our belief that these are high-quality, safe tires.”
The context of statements is often telling. See, e.g., Casella v. Webb, 883 F.2d 805, 808 (9th Cir.
1989) (“What might be innocuous ‘puffery’ or mere statement of opinion standing alone may be
actionable as an integral part of a representation of material fact when used to emphasize and induce
reliance upon such a representation.”); Scritchfield v. Paolo, 274 F. Supp. 2d 163, 175-76 (D.R.I.
2003) (stressing that “a company’s statements that it is ‘premier,’ ‘dominant,’ or ‘leading’ must not
be assessed in a vacuum (i.e., by plucking the statements out of their context to determine whether
the words, taken per se, are sufficiently ‘vague’ so as to constitute puffery”)). So it is with
Firestone’s August 1, 2000 statement. In July 2000, consumers filed multiple lawsuits against
Firestone alleging that ATX tire tread separation caused Ford Explorers to roll over and caused
fatalities. That same month, several safety groups urged Ford to recall the Explorers with Firestone
ATX tires on them. On August 1, 2000, Firestone issued the statement concerning the “objective
data.” A reasonable juror could infer that the “objective data” representation was a direct response
to the lawsuits, or to the public challenges to the safety of Firestone’s tires, or to both.
         A reasonable juror could also conclude that the statement, without some qualification or
accompanying disclosure of the numerous pieces of evidence that tended to cut the other way, was
a misrepresentation. In 1996, Firestone had performed random quality control high-speed durability
tests on ATX tires. In one of the sample tests, Firestone examined 129 ATX tires made at the
Decatur plant. Eighteen of those tires failed the test due to tire tread separation. In another random
test of 229 ATX tires from Decatur, thirty-one failed. In an additional random test of 18 ATX tires,
eight failed, seven of which were from the Decatur plant. Internal Firestone documents show that
Firestone knew since 1996-1997 from property damage and injury claims and tire performance data,
No. 03-5505           City of Monroe v. Bridgestone Corp., et al.                             Page 17


such as warranty adjustments and financial analysis of such claims, that its ATX tires were failing
at unprecedented rates. Similarly, a Firestone chart reveals that from 1998 to 1999, tread separations
for the Wilderness ATX tires--one of the ATX models--increased by 194%. According to a 1999
internal Firestone report, in 1997 and 1998, another of the ATX models-- the ATX II
tires--accounted for the majority of Firestone’s claims but less than 10% of its total production.
Further, in Venezuela, between 1990 and 1998, over forty people were killed in Explorer accidents
due to ATX tire failures and Ford had demanded that Firestone alter the design of its ATX tire being
sold in Venezuela to include a nylon layer.
        Firestone does not point to any record evidence showing its statement regarding the
“objective data” was supported with respect to the ATX tires. It may be the case that at the
summary judgment or trial stages of this dispute, Firestone will identify evidence that persuades the
finder of fact that, as of the date of its statement on August 1, 2000 that “[p]roperly inflated and
maintained Firestone ATX . . . tires are among the safest tires on the road today,” id. at 171, the
available objective data supported that claim. Or perhaps Firestone will introduce some other
evidence showing that its statement about the objective data was in fact not misleading or false.
However, at this stage in the lawsuit, construing the Complaint in a light most favorable to the
Retirement Fund, see PR Diamonds, 364 F.3d at 680, we conclude that Firestone’s representation
concerning “objective data” could be deemed a material misrepresentation by a reasonable
fact-finder. See, e.g., Hanon v. Dataproducts Corp., 976 F.2d 497, 502 (9th Cir. 1992) (holding that
the defendants’ statements emphasizing superior quality were material because “a reasonable jury
could conclude that [the company] publicly released optimistic statements . . . when it knew [its
product] could not be built reliably”); In re ValuJet, Inc. Sec. Litig., 984 F. Supp. 1472, 1477-78 (N.
D. Ga.1997) (statement that airline’s safety record was “certifiably among the very best in the airline
industry” was material and actionable); In re F & M Distribs. Inc. Sec. Litig., 937 F. Supp. 647, 653
(E. D. Mich.1996) (holding that the defendant chain store’s failure to disclose an adverse industry
trend that made the “deal buying” strategy touted in its prospectus less viable than otherwise known
could be actionable); In re Medimmune, Inc. Sec. Litig., 873 F. Supp. 953, 967 (D. Md. 1995)
(holding that a drug company’s statements that “[t]he results of treatment with [its product] were
highly statistically significant along all of the efficacy parameters,” and “[t]he data are
overwhelmingly good” were material and actionable); Cohen v. Prudential-Bache Sec., Inc., 713 F.
Supp. 653, 658 (S.D.N.Y. 1989) (holding that a broker’s statement to a client that she “would
receive a very strong cash flow without risk to her initial investment” could not be dismissed as
immaterial puffery).
        In holding that Firestone’s August 1, 2000 statement was actionable, we express no opinion
as to whether Firestone necessarily had an obligation to disclose the various safety and looming
regulatory issues surrounding the ATX tires regardless of whether it affirmatively spoke on the
subject. The Retirement Fund does not rely on that allegation and, indeed, has waived such an
argument. See App. at 558 (the Retirement Fund stating in a brief to the district court that
“[p]laintiffs do not contend that in the face of defendants’ silence they should have disclosed the
defects in the ATX tires.”). We merely hold that once Firestone elected to make statements such
as the statement regarding the “objective data,” it was required to qualify that representation with
known information undermining (or seemingly undermining) the claim. See Mayer v. Mylod, 988
F.2d 635, 639 (6th Cir. 1993) (“[C]orporate officers are not required to speak, but once they do, they
must be truthful if their comments are material to investors’ decisionmaking.”); In re K-tel Intern,
Inc. Sec. Litig., 300 F.3d 881, 896, 898 (8th Cir. 2002) (“[T]he requirement is not to dump all known
information with every public announcement, but the law requires ‘an actor to provide complete and
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                           Page 18


non-misleading information with respect to the subjects on which he undertakes to speak.’” (quoting
Helwig, 251 F.3d at 561) (emphasis added by Eighth Circuit).19
        Firestone also argues that the August 1, 2000 statement is non-actionable because it was
“immaterial as a matter of law.” Appellee Firestone’s Br. at 40. Echoing the district court, Firestone
argues that the statement was one of ‘”of general optimism and in its defense of its products,’” id.
(quoting App. at 1018), and one that “reflect[ed] the market’s understanding that others had
suggested the products were not as safe as Firestone believed.” Appellee Firestone’s Br. at 47. As
such, Firestone argues, the statement does “‘not come within the duty of disclosure,’” id. at 44
(quoting Sofamor Danek, 123 F.3d at 402), because such opinions are ‘”routinely discounted by
reasonable investors,” id.
        We reject this argument also, for several reasons. First, we do not agree that the statement
that “the objective data clearly reinforces our belief that these are high-quality, safe tires” was a
statement of general optimism or purely opinion. Rather, the statement was an assertion of a
relationship between data and a conclusion, one that a finder of fact could test against record
evidence.
        Second, even if the statement regarding “objective data” was best classified as an opinion,
it was still specific enough to form the basis of an actionable securities fraud claim. Federal courts
have drawn the line on whether a statement may be actionable based, not on whether in the abstract
a statement was best characterized as fact or opinion but, rather, if it was an opinion, on the nature
of the statement. The key is whether the proposition at issue can be proven or disproven using
standard tools of evidence. Thus, as alluded to above, vague statements not subject to verification
by proof are generally deemed non-actionable puffery. But “opinion or puffery . . . in particular
contexts when it is both factual and material . . . may be actionable.” Longman, 197 F.3d at 683
(emphasis added).
        For example, in Virginia Bankshares, the Supreme Court held that an opinion expressed by
a corporation’s board members to its minority stockholders that the stock price of $42.00 for the
purchase of the company’s shares was a “high value” and represented a “fair” transaction could be
both factual and material. 501 U.S. at 1093. In so holding, the Court expressly rejected the
petitioner’s argument, similar to that offered by Firestone here, that the Court “would invite . . .
amorphous issues outside the readily provable realm of fact if [it] were to recognize liability . . . on
proof that the directors did not recommend the merger for the stated reason.” Id. at 1091. “It is no
answer to argue,” the Court stated, “that the quoted statement on which liability was predicated did
not express a reason in dollars and cents, but focused instead on the ‘indefinite and unverifiable’
term, ‘high’ value, much like the similar claim that the merger’s terms were ‘fair’ to shareholders.”
Id. at 1093. “The objection ignores the fact,” observed the Court, “that such conclusory terms in a
commercial context are reasonably understood to rest on a factual basis that justifies them as
accurate, the absence of which renders them misleading.” Id. Rather, “[p]rovable facts either
furnish good reasons to make a conclusory commercial judgment, or they count against it, and
expressions of such judgments can be uttered with knowledge of truth or falsity just like more




         19
             Contrary to Bridgestone and Firestone’s assertions, such a conclusion is consistent, or not inconsistent, with
this court’s decision in Sofamor Danek, 123 F.3d at 401-02. In that case, the defendant corporation was silent as to the
alleged product defects and likely regulatory problems and this court held there was no actionable omission. In contrast,
Firestone (and Bridgestone) chose to speak, implicating, through that choice, the duty to speak truthfully as to the topics
on which it spoke.
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                          Page 19


definite statements, and defended or attacked through the orthodox evidentiary process     that either
substantiates their underlying justifications or tends to disprove their existence.” Id.20
         This court’s en banc decision in Helwig also reflected these insights. In that case, the
defendant corporation stated that it was “comfortable” with favorable earnings per shares estimates
made before the passage of a piece of legislation even though in secret, internal communications,
the corporation was making negative predictions about the impact of the statute on earnings. Helwig
recognized that such opinions about a verifiable assertion “contain ‘at least three implicit factual
assertions: (1) that the statement is genuinely believed, (2) that there is a reasonable basis for that
belief, and (3) that the speaker is not aware of any undisclosed facts tending to seriously undermine
the accuracy of the statement.’” Helwig, 251 F.3d at 557 (quoting Schneider v. Vennard (In re Apple
Computer Sec. Litig.), 886 F.2d 1109, 1113 (9th Cir. 1989)). Reversing the district court’s dismissal
of the securities fraud claim, Helwig noted that unlike the facts underlying this court’s decisions in
“Sofamor Danek, [in which] the information claimed as adverse to the company had already been
disclosed and was publicly available to permit an independent assessment by investors and
analysts,” or “Starkman, [which] was a case about non-disclosure,” id., the complaint in Helwig
“[wa]s about selective disclosure of information . . . essential to complete a picture [the defendants]
had only partially revealed.” Helwig, 251 F.3d at 560 (emphasis added). “[T]he protections for soft
information,” Helwig stated, “end where speech begins.” Id.
        As in Helwig, the Retirement Fund’s Complaint pleads a theory of liability for selective,
incomplete disclosure. Following Helwig, we conclude that a reasonable juror in this case could
conclude that Firestone’s statement that “the objective data clearly reinforces our belief that these
are high-quality, safe tires” carried with it the representation that there was a reasonable basis for
that belief, and that Firestone was not aware of any undisclosed facts tending to seriously undermine
the accuracy of the statement, and that both those representations were misleading. That juror could
thus find that the statement concerning objective data was actionable. Accord Warshaw v. Xoma
Corp., 74 F.3d 955, 959 (9th Cir. 1996) (holding that a company’s statements regarding the safety
of its new products were actionable where the reassuring statements “were designed to prevent
shareholder flight in the aftermath of a damaging report regarding the possible hazards of [the
product]”).
        Finally, as to Firestone’s contention that the statement about the “objective data” is
non-actionable because it “reflect[ed] the market’s understanding that others had suggested the
products were not as safe as Firestone believed,” Appellee Firestone’s Br. at 47, this argument
mischaracterizes the facts as pled in the Complaint. A number of courts have indeed suggested    that
misrepresentations about a fact already known to the marketplace are not actionable.21 And,
although this Court has not directly addressed this theory, it voiced the logical complement in
Helwig, which, in reaching its conclusion that the statement at issue was material, relied in part on
the fact that the information at issue was “known exclusively” to the defendants. 251 F.3d at 560
(emphasis added). It makes logical sense that a claim based on the alleged withholding from the

         20
            This court has recognized that “Virginia Bankshares is instructive for” materiality analysis in § 10(b) cases
because although the Court in Virginia Bankshares was concerned with § 14(a), not § 10(b) of the Securities Exchange
Act, “the [SEC] has promulgated the same rule for each section: violations occur under each section whenever a
statement is false or a material omission makes the statements which are made misleading.” Mayer v. Mylod, 988 F.2d
635, 639 n.2 (6th Cir. 1993) (citing 17 C.F.R. §§ 240.10b-5 and 240.14a-9 (1991)).
         21
            See, e.g., Longman, 197 F.3d at 684 (“Plaintiffs’ securities fraud claim cannot succeed because, despite the
fact that Food Lion denied the charges, the nature of the off-the-clock claims and the claims’ risk to earnings were in
fact well known to the market before the Prime Time Live broadcast, and therefore Food Lion’s omissions were not
material.”); In re Apple Computer Sec. Litig., 886 F.2d 1109, 1115 (9th Cir. 1989) (“We conclude that in a fraud on the
market case, the defendant’s failure to disclose material information may be excused where that information has been
made credibly available to the market by other sources.”).
No. 03-5505           City of Monroe v. Bridgestone Corp., et al.                              Page 20


public of information that contradicts information publicly stated is defeated by a demonstration that
the allegedly withheld information was in fact disclosed to the public; however, that rule is not
apposite here. Contrary to the implications of Firestone’s argument, that “others” had “suggested
the products were not as safe as Firestone believed” does not demonstrate that the market had
received the adverse information-- about the tires’ test data, the claims for liability based on tire
failure, and the deaths in the United States and abroad--that form the basis of the information the
Retirement Fund alleges was withheld from the public. Rather, in an open and efficient securities
market “information important to reasonable investors (in effect, the market) is immediately
incorporated into stock prices.” In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1425 (internal
citation omitted). And, indeed, not until after Firestone’s August 9, 2000 recall did the share value
for both the Bridgestone common stock and Bridgestone ADRs each plummet by over one third of
their value in approximately six weeks: between August 8, the day before the recall, and September
21, 2000, Bridgestone’s common stock share price on the Tokyo stock exchange dropped from over
$2,200.00 to less than $1,400.00, and its ADR share price from over $202.00 to less than $122.00.
Accordingly, a reasonable juror could conclude that the revelations that accompanied the
announcement of the August 2000 recall were in part reflected in this substantial share price change,
which would suggest strongly that the market had not--prior to the public disclosures encapsulated
in the recall--received the full extent of information related to the safety-related problems associated
with Firestone’s tires, and that such information was quite important to investors.
         For the foregoing reasons, we hold that while most of the statements alleged by the
Retirement Fund were insufficiently specific to be actionable, the August 1, 2001 statement
regarding “objective data” is actionable. We turn now to Bridgestone’s alleged misrepresentations
in the Annual Reports’ financial statements.
               b.      Financial Statements in Bridgestone’s Annual Reports
        The district court held that none of the claims based on financial statements in Bridgestone’s
Annual Reports for fiscal years 1996 through 1999 were actionable. The district court reasoned that
the Complaint “failed to plead a single fact that would have caused a reasonable investor to believe
that Bridgestone’s financial statements were prepared according to United States GAAP, or that a
reasonable investor would have relied on this belief,” failed to “plead any particular fact that could
establish any inference that Bridgestone violated Japanese GAAP,” and that “even if Bridgestone
was subject to United States GAAP,” the Complaint “failed to plead with particularity any facts
establishing a strong inference that Bridgestone should have ‘considered probable’ a Firestone recall
and thus established a huge contingent liabilities fund.” App. at 1016 (quoting FASB 5).
Bridgestone argues that we should affirm on essentially the district court’s rationales. As discussed
below, we disagree with that conclusion with respect to the statement in Bridgestone’s 1999 Annual
Report, but agree with the result reached by the district court concerning the claims based on the
financial statements in Bridgestone’s 1996-1998 Annual Reports.
                       i.      Bridgestone’s 1999 Annual Report
        Issued in March 2000, Bridgestone’s 1999 Annual Report included at least two
representations that a reasonable juror might conclude were material misrepresentations: (1) that
no impairment of Bridgestone’s corporate assets was substantially certain to occur through problems
arising from customers or regulators’ actions (the “No Impairment” representation); and (2) that
there were no actual, material losses connected to the lawsuits and responses to the regulatory
scrutiny of the ATX tires (the “No Loss” representation).
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                          Page 21


                                     (a)      The “No Impairment” Representation
        The 1999 Annual Report included several groups of statements that, taken together,
constituted a representation to the investing public that no impairment of Bridgestone’s corporate
assets was substantially certain to occur through problems arising from customers or regulators’
actions. The below comparison of the Annual Report’s accounting policy statements, the actual
disclosures under those statements, and the alleged “on the ground” facts at Bridgestone and
Firestone, reveals why a reasonable juror could conclude that this statement was a misrepresentation.
        The accounting policy statements communicated to the investing public that if a loss or asset
impairment was probable, the Annual Report would disclose that contingency in some form. The
1999 Report included a letter from Bridgestone’s outside auditors stating that it was prepared “in
conformity with accounting principles generally accepted in Japan applied on a consistent basis.”
Under International Accounting Standard § 9010.08-.09, applicable in Japan pursuant to the
International Accounting Standards Committee, “loss contingencies should be recorded if it is
probable that an asset has been impaired or a liability incurred at the balance sheet date and a
reasonable estimate of the amount of the resulting loss can be made.” Section 9010.08-09 provides
further that “if either of the conditions is met and the possibility of the loss is not remote, the
existence of the contingent loss should be disclosed in the financial statements.” The 1999 Report
also stated that “the Japanese consolidated financial statements have been prepared in accordance
with the provisions set forth in the . . . accounting principles and practices generally accepted in
Japan (‘Japanese GAAP’).” It further represented that Bridgestone’s “accompanying financial
statements include the accounts of certain foreign subsidiaries, which are based upon U.S. GAAP,”
a reference to Firestone, its largest foreign subsidiary. We thus disagree with the district court’s
observation that no investor could have reasonably concluded that a representation was being made
under United States GAAP.
         United States GAAP, via FASB 5,22 “requires that loss be accrued whenever it is probable
a loss has been incurred or an asset impaired and the amount of the loss can be reasonably estimated.
If the loss is at least reasonably possible, but no reasonable estimate can be made, the contingency
at a minimum should be disclosed.”     The unmistakable representation, under both the Japanese and
American GAAP policies,23 was that if a loss or asset impairment was probable, the Annual Report
reader would see a discussion of it in some form in the report. A fortiori then, the Report included
the representation that if there were a substantial certainty of such an impairment, that contingency
or risk would be disclosed. Cf. United States v. Lamartina, 584 F.2d 764, 766 (6th Cir. 1978)
(embracing this greater-includes-the-lesser logic in the criminal context and noting that “a defendant
may be found guilty of an offense necessarily included in the offense charged.”).
       The disclosures under the Annual Report’s stated policies included no reference to the
impairment or likelihood of impairment to the asset of the Firestone Brand. The notes to the
Consolidated Financial Statements did include a category labeled “Contingent Liabilities,” which
disclosed deferred income tax assets, deferred tax liabilities, discounted export bills, and lease
commitments, note regarding “Market Value Information,” which provided a disclaimer that


         22
           In the United States, GAAP “are the official standards adopted by the American Institute of Certified Public
Accountants (the “AICPA”), a private professional association, through three successor groups it established: the
Committee on Accounting Procedure, the Accounting Principles Board (the “APB”), and the Financial Accounting
Standards Board (the ‘FASB’).” Ganino v. Citizens Utils. Co., 228 F.3d 154, 160 n.4 (2d Cir. 2000). “The SEC treats
the FASB’s standards as authoritative.” Id.
         23
           The policies articulated in FASB 5 and § 910.08-09 are very similar if not identical in substance. The absence
on Note 11's list of differences between U.S. and Japanese GAAP of any reference to the two provisions reinforces that
notion.
No. 03-5505            City of Monroe v. Bridgestone Corp., et al.                               Page 22


Bridgestone was “exposed to the currency fluctuation risks in relation” to certain “forward contracts
and to the interest rate fluctuation in relation to interest rate swaps,” as well as statements cautioning
that “those derivatives do not exceed corresponding financial instruments,” and that Bridgestone
“believes that the risk that the counterparts will not be able to fully satisfy their obligations under
contracts is minimum.” However, neither the Contingent Liability section nor the Market Value
Information section, nor any other portion of the 1999 Annual Report, disclosed the contingency of
any loss or asset impairment related to any of the Firestone tire products due to the lawsuits,
regulatory scrutiny, or safety-related reasons. Nor did they disclose the potential risk of such an
event.
        The 1999 Annual Report’s simultaneous inclusion of the accounting policies, the listed
contingencies, and the absence of any mention of a contingency concerning Firestone tires
constituted a representation that no loss or asset impairment arising from Firestone tire products due
to the lawsuits, regulatory scrutiny, or safety-related reasons was “probable” or “reasonably
possible.” The question then is whether a reasonable juror could find that the facts belied that
representation.
        Bridgestone suggests that it is only in hindsight evident that there was a probability or
reasonable possibility of a substantially adverse event as of March 2000. We disagree. By March
2000, Bridgestone and Firestone, according to the allegations of the Complaint, had received
thousands of claims for and complaints concerning ATX tire failures, covering hundreds of serious
injuries and 174 fatalities by 2000 allegedly resulting from problems with the tires. Firestone had
paid off State Farm for the costs of automobile accidents attributable to ATX tire failures. The
investigations and scrutiny by the Arizona and Venezuelan governments reinforces the impression
that evidence was present of serious risks of adverse consequences for the ATX brand. From 1998
to 1999, tread separations for one ATX model increased by 194%. In 1997 and 1998, another of
Firestone’s ATX model’s tires accounted for the majority of the company’s claims but during those
same years, that model accounted for less than 10% of Firestone’s total production. These claims,
suits and payments were discussed at least quarterly from 1997 to 1999 in meetings that consisted
of Firestone’s senior management group, including Bridgestone Executive Vice-president Ono, and
Firestone’s financial group, quality group, and public relations / marketing department. A major
decision such as a recall by a Fortune 500 corporation is unlikely to simply materialize out of the
blue. As the Complaint alleges, the various increasing problems at Firestone crescendoed in 1998
and 1999. From the facts pleaded, assumed to be true, and construing the complaint in the light most
favorable to the plaintiffs, it was, under all these circumstances, at least “reasonably possible” if not
“probable” that, as of March 2000, the Firestone flagship brand ATX tires would experience a
serious, adverse, financial event--an impairment of the asset. Bridgestone’s effective representation
that no loss or asset impairment arising from Firestone tire products due to the lawsuits, regulatory
scrutiny, or safety-related reasons was “probable” or “reasonably possible” could thus be deemed
by a reasonable juror to have been a misrepresentation based on the facts available at that time.
        The question, then, is whether the “No Impairment” representation was material. Put another
way, was it “‘so obviously unimportant to a reasonable investor that reasonable minds could not
differ on the question of [its] unimportance?’” Helwig, 251 F.3d at 563 (quoting Ganino, 228 F.3d
at 162) (emphasis added by Helwig). We conclude that it was not. The 1999 Annual Report
included at least six statements that stressed to shareholders or potential shareholders the
significance of the Firestone brand or the American and North American market, of which Firestone
was Bridgestone’s major brand: (1) “We are determined to assert a singular advantage in product
technology. . . . We increased our market share in North America in 1999 in . . . the original
equipment market. Our North American operations are approaching a market share of 20%.”; (2) a
representation that as a percentage of Bridgestone’s net sales, its sales in the Americas were 41.5
%, the largest of any geographic sector; (3) “[w]e increased our market share in North America in
1999 . . . Demand for original equipment tires continued to grow in 1999 in the booming North
No. 03-5505           City of Monroe v. Bridgestone Corp., et al.                            Page 23


American automobile market”; (4) a statement under the bold, purple-colored, large font label of
“Trends And Topics” that “[o]ur multibrand strategy--centered on . . . Firestone . . . raised our
market profile further in 1999;” (5) “aggressive product development and strategic marketing have
re-established the Firestone name as a vigorous brand in premium-grade tires, as well as in
large-volume, middle-market tires;” and that (6) “[a]s a major supplier to leading European
automakers, we have developed business with the North American operations of those automakers,
too. We also supply tires to nearly all the Japanese-owned vehicle plants in North America.”
Firestone’s financial and brand name health was of obvious importance to the overall state of
Bridgestone’s financial health. That relationship was evident both from its portrayal in the Annual
Reports and in the severely adverse results that resulted immediately after the asset impairment
occurred: in addition to the stock and ADR share price drops, recall that Firestone and Bridgestone
each experienced a net $510 million loss for the 2000 fiscal year and that Bridgeport’s net earnings
in 2000 were 80% less than in fiscal year 1999. We conclude--at a minimum--that the probability
or reasonably possibility of Firestone’s brand name experiencing a significant asset impairment was
not information “so obviously unimportant to a reasonable investor that reasonable minds could not
differ on the question of [its] unimportance.” Id. (internal quotations omitted and emphasis omitted)
This information was therefore not “immaterial” within the meaning of the federal securities laws.
15 U.S.C. § 78u-5(c)(1)(A)(ii). A reasonable juror could conclude that Bridgestone’s “no
impairment” representation in the 1999 Annual Report was actionable.
                               (b)     The “No Loss” Representation
        The second representation from Bridgestone’s 1999 Annual Report that a reasonable jury
could conclude was actionable was its effective representation that there were no actual, material
losses connected to the lawsuits and responses to the regulatory scrutiny of the ATX tires. FASB 5
“requires accrual by a charge to income (and disclosure) for an estimated loss from a loss
contingency if two conditions are met: (a) information available prior to issuance of the financial
statements indicates that it is probable that an asset had been impaired or a liability had been
incurred at the date of the financial statements, and (b) the amount of loss can be reasonably
estimated.” The Retirement Fund asserts that both FASB 5 and its Japanese analogue gave rise to
a duty to disclose because Bridgestone “had specific knowledge throughout the Class Period that
[it was] already incurring substantial loses through the replacement of tires, settlements of lawsuits
and payment of claims.” Appellant’s Br. at 47.
        Bridgestone responds on this point with two arguments. First, it argues that the Complaint’s
claims based on problems related to the tires’ safety record are an impermissible attempt to plead
fraud by hindsight. Bridgestone asserts that “the Retirement Fund has simply seized upon
disclosures made in later annual reports and alleged that they should have been in earlier ones.”
Appellees Bridgestone and Kaizaki’s Br. at 30 (internal quotations omitted). This is literally true
but does not mean that the Complaint advances an impermissible theory of liability: the losses
already sustained as of March 2000 were clearly facts reasonably (and actually) available to
Bridgestone in an amount calculable with precision or near-precision as of March 2000; if they were
material and subject to disclosure under the stated accounting policies, it is no answer to say they
were eventually disclosed later in time.
         Bridgestone’s second and more forceful argument is that these losses were not material.
Bridgestone asserts that “the complaint contains no pleaded fact indicating Bridgestone knew about
any substantial losses or that those amounts . . . actually were substantial for an $18 billion
company.” Appellees Bridgestone and Kaizaki’s Br. at 29 (internal quotations omitted). “Indeed,”
Bridgestone argues, “every manufacturer replaces its products, settles lawsuits, and pays claims as
part of its day-to-day business; yet, no one would contend these activities alone requir[e] reserves.”
Id.
No. 03-5505           City of Monroe v. Bridgestone Corp., et al.                             Page 24


        This argument is ultimately unpersuasive for three reasons. First, assuming the truth of the
facts set forth in the Complaint, by March 2000--when the Bridgestone 1999 annual Report was
issued--over 2000 rollover accidents, 700 serious injuries and 170 fatalities had occurred yielding
thousands of claims for and complaints concerning ATX tire failures and Bridgestone (via Firestone)
incurred numerous categories of financial losses, including those affiliated with entering into
numerous settlement agreements with the injured parties involving compensation, reimbursing State
Farm, absorbing the cost of replacing the tires in Arizona, and absorbing the cost of adding a nylon
layer to its tires in Venezuela. A reasonable juror could infer from this category-based evidence (as
opposed to dollar-amount-based evidence not included in the Complaint) that the related losses were
substantial. That the Retirement Fund has not through disclosure at this pre-discovery stage
identified the precise amount of the payments as of March 2000, or amounts corresponding to
agreements reached by Bridgestone or Firestone by March 2000 for sums not as of then yet paid out,
is no bar to the claim. The precise information as to dollar amount is presumably available thus far
only to Bridgestone and may well emerge in discovery. It is enough at this motion to dismiss stage
that the Complaint alleges specific losses via seemingly out of the ordinary payments on this wide
array of issues, each of which, as stated, was a definite amount that had already been paid out by the
time of the release of the subsequent annual report. See FASB 5 (requiring the disclosure of
“information available prior to issuance of the financial statements indicat[ing] that it is probable
that an asset had been impaired or a liability had been incurred at the date of the financial
statements” the amount of which can “be reasonably estimated”).
        Second, while it is likely the case that not every settlement or claim requires a reserve, that
is besides the point here. These payments were not as a group routine or minor; they covered
thousands of claims that alleged a common problem with a major product of Bridgestone’s largest
subsidiary in its highest volume sales market, the Americas. Because the 1999 Annual Report
represented that there were no actual losses connected to the lawsuits and responses to the regulatory
scrutiny of the ATX tires’ failures, there was a duty to disclose any material information to the
contrary, be it in the form of a reserve, notice of a contingency, or some other form of disclosure.
        Third, to the extent the materiality question is close, the general rule for securities fraud
cases is that “[a]t [the motion to dismiss] stage in the proceedings, a complaint may not properly be
dismissed on the ground that the alleged misstatements or omissions are not material unless they are
so obviously unimportant to a reasonable investor that reasonable minds could not differ on the
question of their unimportance.” Helwig, 251 F.3d at 563 (internal citations, quotations, ellipses and
emphasis omitted). Courts “generally reserve such questions for the trier of fact.” Id. (collecting
cases). We think this approach is appropriate here, both because a reasonable juror could find this
claim actionable and because we are reversing on independent grounds with respect to a separate
statement in the 1999 Annual Report.
                       ii.     1996-1998 Annual Reports
        With respect to the financial statements for the Annual Reports for fiscal years 1996 to 1998,
we conclude that the district court did not err in dismissing the claims based on those statements.
Unlike the 1999 Annual Report, these reports contained no representation to the effect that United
States GAAP standards applied. Any claim, if at all, based on these Annual Reports would have to
be based solely on the implied statement (to American investors at that) that International
Accounting Standard § 9010.08-.09 applied. Most significantly, much of the evidence that the
Complaint relies on as establishing that the asset was impaired or likely to suffer impairment became
fully available after March of 1999, when the last of these three reports was issued, particularly the
data summary on the 34 suits against Bridgestone based on deaths or injuries by consumers of
Firestone-equipped Ford Explorers from rollovers allegedly caused by Firestone tires, the tread
separations increases from 1998 to 1999, and the dramatic rise in problems in 1998 and 1999. The
facts tending to undermine the truth of the Annual Reports’ representations regarding impairment
No. 03-5505                City of Monroe v. Bridgestone Corp., et al.                                          Page 25


and loss were thus not known at all or not known to their full extent as of the dates that the Annual
Reports for the 1996--1998 fiscal years were issued.
        For the foregoing reasons, we conclude that the Complaint pleaded three actionable claims:
(1) Firestone’s August 1, 2000 “objective data” representation; (2) Bridgestone’s “No Impairment”
representation; and (3) Bridgestone’s “No Loss” representation.
         2.         Scienter
        Mindful that to survive a motion to dismiss, a federal securities fraud claim must “withstand
an exacting statement-by-statement analysis,” In re First Union Corp. Sec. Litig., 128 F. Supp. 2d
871, 886 (W.D.N.C. 2001), the question then is whether the Complaint adequately pled scienter for
these particular statements as against Bridgestone, Firestone, or Ono. Scienter is “a mental state
embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185,
193 n.12. “As with all fraud claims, Federal Rule of Civil Procedure 9(b) applies to pleading a
defendant’s state of mind, allowing that ‘[m]alice, intent, knowledge, and other condition of mind
of a person may be averred generally.’” PR Diamonds, 364 F.3d at 682 (quoting Fed. R. Civ. P.
9(b)).
        However, in 1995, Congress having “concluded that Rule 9(b) had ‘not prevented abuse of
the securities laws by private litigants,’”24 enacted the Private Securities Litigation Reform Act
(“Reform Act”). The Reform Act grafted on “special requirements for pleading scienter in federal
securities fraud cases.” PR Diamonds, 364 F.3d at 682. As amended by the Reform Act, the
securities laws provide:
         In any private action arising under this chapter in which the plaintiff may recover
         money damages only on proof that the defendant acted with a particular state of
         mind, the complaint shall, with respect to each act or omission alleged to violate this
         chapter, state with particularity facts giving rise to a strong inference that the
         defendant acted with the required state of mind.
15 U.S.C. § 78u-4(b)(2) (emphasis added). Under the Reform Act, if a plaintiff does not meet this
requirement, the reviewing district court   “shall, on the motion of any defendant, dismiss the
complaint.” 15 U.S.C. § 78u-4(b)(3).25 In enacting the Reform Act’s scienter-related provisions,
Congress sought simultaneously to curb frivolous securities fraud litigation, which “‘unnecessarily
increase[s] the cost of raising capital and chill[s] corporate disclosure, [and is] often based on
nothing more than a company’s announcement of bad news, not evidence of fraud,’” Comshare, 183
F.3d at 548 (quoting S. Rep. No. 104-98 (1995), 1995 U.S.C.C.A.N. 679, 690), and “to protect
investors and to maintain confidence in the securities markets.” H.R. Conf. Rep. No. 104-369, at
31 (1995), 1995 U.S.C.C.A.N. 730. Reflecting this balance, this court has noted that after the


         24
              Comshare, 183 F.3d at 548 (quoting H.R. Conf. Rep. No. 104-369 (1995), reprinted in 1995 U.S.C.C.A.N.
730, 818).
         25
             We take no position as to the constitutionality of the Reform Act’s heightened scienter pleading requirements.
The Seventh Amendment to the Constitution provides that “the right of trial by jury shall be preserved, and no fact tried
by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common
law.” U.S. Const. Am. VII. Traditionally, there has been a right to jury trial for securities fraud claims. See, e.g., SEC
v. Infinity Group Co., 212 F.3d 180, 196 (3d Cir. 2000). The Reform Act compels dismissal unless the facts pleaded
in the Complaint produce a “strong inference that the defendant acted” with scienter. 15 U.S.C. § 78u-4(b)(2). One
might argue that for cases where a juror could conclude that the facts pleaded showed scienter, but that conclusion would
not be the most plausible of competing inferences, a Seventh Amendment Problem is presented. However, the
Retirement Fund has not advanced any such argument and we decline to address the merits of this constitutional question
sua sponte.
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                        Page 26


Reform Act, for those complaints advancing non-frivolous, well-pled allegations of scienter, “[o]ur
willingness to draw inferences in favor of the plaintiff remains unchanged.” Helwig, 251 F.3d at
553; see also id. (rejecting an interpretation of the Reform Act under which “it [would] become a
choke-point for meritorious claims”).
          In elaborating on the meaning of the statute’s term “strong inference,” Helwig explained that
“[i]nferences must be reasonable and strong--but not [necessarily] irrefutable.” Id. The Complaint
“need not foreclose all other characterizations of fact, as the task of weighing contrary accounts is
reserved for the fact finder.” Id. Rather, under the “strong inference” requirement, the Retirement
Fund is “entitled only to the most plausible of competing inferences.” Id. “‘Strong inferences’
. . . involve deductive reasoning; their strength depends on how closely a conclusion of misconduct
follows from a plaintiff’s proposition of fact.” Id. (quoted with approval in In re Ford, 381 F.3d at
568). Our task is thus to determine whether the Complaint alleges facts that, if true, would, by
forming the basis for a strong inference, “convince a reasonable person that the defendant knew a
statement was false or misleading.” Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1105 (10th Cir.
2003). Ultimately, in our scienter analysis, we “employ[ ] a totality of the circumstances analysis
whereby the facts argued collectively must give rise to a strong inference of at least recklessness.”
PR Diamonds, 364 F.3d at 683. “‘This necessarily involves a sifting of allegations in the
complaint.’” PR Diamonds, 364 F.3d at 684 (quoting Helwig, 251 F.3d at 551). Towards that end,
Helwig identified nine factors that, while “not exhaustive,” are “helpful” in determining whether the
facts as pled are “probative” of scienter in securities fraud actions:
         (1)      insider trading at a suspicious time or in an unusual amount;
         (2)      divergence between internal reports and external statements on the same subject;
       (3)      closeness in time of an allegedly fraudulent statement or omission and the later
disclosure of inconsistent information;
         (4)      evidence of bribery by a top company official;
       (5)    existence of an ancillary lawsuit charging fraud by a company and the company’s
quick settlement of that suit;
         (6)      disregard of the most current factual information before making statements;
       (7)     disclosure of accounting information in such a way that its negative implications
could only be understood by someone with a high degree of sophistication;
       (8)    the personal interest of certain directors in not informing disinterested directors of
an impending sale of stock; and
         (9)      the self-interested motivation of defendants in the form of saving their salaries or
jobs.
251 F.3d at 552 (citing Greebel v. FTP Software,   Inc., 194 F.3d 185, 196 (1st Cir. 1999)) (in turn,
collecting cases). With these standards in mind,26 we turn to analyze scienter as to each of the three



         26
            We note that, contrary to Bridgestone’s and Firestone’s arguments, which rely heavily on In re
Carter-Wallace Inc. Sec. Litig., 220 F.3d 36 (2d Cir. 2000), and Oran v. Stafford, 226 F.3d 275 (3d Cir. 2000), the
precedent of this circuit frames our scienter inquiry in this claim for securities fraud based on partial or incomplete
disclosure.
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                           Page 27


relevant defendants, the two corporate legal persons--Firestone and Bridgestone--and the one
individual, Firestone CEO and Bridgestone Executive Vice-President Ono. Id.
                  a.        Scienter as to Firestone
        On August 1, 2000, Firestone released its statement that “[w]e continually monitor the
performance of all our tire lines, and the objective data clearly reinforces our belief that these are
high-quality, safe tires.” With respect to Firestone’s scienter concerning this statement, at least five
of the nine non-exclusive Helwig factors are apparent in the Complaint’s alleged facts. First, there
was a clear “divergence between internal reports and external statements on the same subject,”
Helwig, 251 F.3d at 552; witness the contrast between the data known or available to Firestone as
of August 2000--concerning the evidence of defective tires from Decatur and three years of a
marked rise in the rates of deaths, injuries and claims and lawsuits based on several thousand
rollover accidents, hundreds of injuries, and nearly 200 fatalities in the United States, over forty
deaths in Venezuela, the multiple deaths in Saudi Arabia--versus the unqualified positive comments
on the “objective data.” Firestone’s awareness of the circumstances at the Decatur plant, including
in particular the strike, the untrained replacement workers, the production schedule time increase
imposed by Bridgestone and Firestone in the labor negotiations with the union, and the test results
pointing to higher rates   of problems in the Decatur-produced ATX tires, make the imputation of
scienter reasonable.27
         Other factors reinforce this conclusion. There was a “closeness in time of an allegedly
fraudulent statement or omission and the later disclosure of inconsistent information,” id.; the
August 1 statement about “objective data” was followed one week later by the recall of 6.5 million
tires and four months later by the admission that many of the tires from the Decatur plant were made
with a shoulder pocket more likely to crack than normal due to an improper angle and were more
likely to fail to stick together properly. There was also a “disregard,” or at least a seeming disregard,
of “the most current factual information before making statements.” Id. Further, to the extent
Firestone disclosed its data to Bridgestone in a form substantially similar to that presented in
Bridgestone’s Annual Reports, Firestone’s “disclosure of accounting information [was made] in
such a way that its negative implications could only be understood by someone with a high degree
of sophistication.” Id. Finally, assuming, as the Complaint alleges, that Bridgestone executives
“kept the accident rate data which they had and which showed these serious problems from safety
regulators . . . so they could report huge profits and their executives could retain their positions of
power, prestige and profit and Bridgestone’s stock and ADRs would continue to trade at inflated,
higher prices, providing the executives with direct economic benefits based on their stock holdings
and options and allowing them to personally pocket huge bonuses based on corporate profits,” there
was thus a “self-interested    motivation of defendants in the form of saving their salaries or jobs.”
Helwig, 251 F.3d at 552.28
        Three of the nine Helwig factors are clearly absent as pertains to Firestone, although in a
sense these factors all go to the same question: conflict of interest. That is, there is no evidence of
alleged insider trading at a suspicious time or in an unusual amount, no evidence of bribery by a top



         27
           Arguably, the known background of the 1979 recall based on a faulty adhesion compound discovered after
Firestone’s public disavowals of such a problem and the strikingly similar pattern to the problems identified in
Firestone’s 2000 investigative report makes it that much more reasonable to impute scienter to Firestone.
         28
            We reject Firestone’s suggestion that the withholding of information by senior corporate executives to
effectuate an inflation of the executives’ bonuses, stock prices, and job security is an “ordinary corporate event.”
Appellee Firestone’s Br. at 45. Even if a regular occurrence, it is not an event this court sanctions as being legitimately
ordinary.
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                           Page 28


company official, and no evidence of personal interest of certain directors in not informing
disinterested directors of an impending sale of stock.
         That covers eight of the nine Helwig factors. A word is in order on whether the remaining
factor is present, i.e. whether there is the “existence of an ancillary lawsuit charging fraud by a
company and the company’s quick settlement of that suit.” Id. There is not, strictly speaking, such
evidence because the claims in question were not based on fraud per se. However, the presence of
closely related evidence carries some weight, particularly given that the list of factors is
“non-exhaustive.” Id. Firestone entered into multiple settlement agreements in response to product
liability suits under which the settlement agreements with plaintiffs were sealed, the parties entered
into stipulated protective orders to conceal discovery, and Firestone would have returned to it
“damaging documents.” The gravamen of these claims and lawsuits, though framed as pre-litigation
claims or lawsuits in tort, was closely parallel to that of this suit: the tires were not safe and
Firestone should be held accountable for that fact. Moreover, Firestone secretly settled with State
Farm all claims for insurance in exchange for lack of disclosure by State Farm and avoided through
a secrecy agreement with the Venezuelan government any disclosure of its having added nylon
layers to ATX tires in Venezuela. The evidence of these secret settlements gets at the same notion
as does the Helwig factor instructing courts to analyze whether there have been ancillary lawsuits
filed charging fraud followed by quick settlement of such suits. The apparent animating idea is that
a company engaging in such practices is, all things being equal, more likely than not aware of the
improper nature of the practice being alleged, or at least of the perception of the given problem,
which puts it on notice and, is fair to say, generates a duty to inquire. These settlements are thus
appropriate to weigh in our scienter analysis, since “this court has made clear that ‘the label which
a plaintiff applies to a pleading does not determine the nature of the cause of action which he
states.’” Minger v. Green, 239 F.3d 793, 799 (6th Cir. 2001) (quoting United States v. Louisville
& Nashville R. Co., 221 F.2d 698, 701 (6th Cir. 1955)). Thus, in substance, if not form, we think
a sixth of the nine factors is also present.
        Given all this, we conclude under the totality of the circumstances that “the facts argued
collectively . . . give rise to a strong inference of at least recklessness.” PR Diamonds, 364 F.3d at
683. The Retirement Fund has therefore adequately pleaded         scienter with respect to its claim against
Firestone for the Firestone’s August 1, 2000 statement.29
                  b.        Scienter as to Bridgestone
        We next analyze whether the Complaint adequately pled scienter against Bridgestone for the
two actionable representations in the 1999 Annual Report discussed above in Part II(C)(i)(a): (1) the
“No Impairment” representation--that no impairment of Bridgestone’s corporate assets was
substantially certain to occur through problems arising from customers or regulators’ actions and


         29
             We do not foreclose the possibility that, going forward, Firestone may be held liable for Bridgestone’s
misrepresentations to the extent the Retirement Fund can prove Firestone communicated misleading results to
Bridgestone. The requirement that the plaintiff allege that the defendant made a misrepresentation does not mean that
the plaintiff must allege that the defendant communicated that misrepresentation directly to the plaintiff. In re Kidder
Peabody Sec. Litig., 10 F. Supp. 2d 398, 407 (S.D.N.Y.1998); see, e.g., Cooper v. Pickett, 137 F.3d 616, 624 (9th Cir.
1997) (defendant ‘”cannot escape liability simply because it carried out its alleged fraud through the public statements
of third parties’”) (quoting Warshaw v. Xoma Corp., 74 F.3d 955, 959 (9th Cir. 1996)); Anixter v. Home-Stake Prod.
Co., 77 F.3d 1215, 1226 (10th Cir. 1996) (“There is no requirement that the alleged violator directly communicate
misrepresentations to plaintiffs for primary liability to attach.”). If the Retirement Fund can show that Firestone was the
originator of Bridgestone’s misrepresentations regarding Firestone and that Firestone knew or should have known that
its misrepresentation would be communicated to investors, primary liability should attach. See Anixter, 77 F.3d at 1226.
We need not assess here the factual question of whether Firestone was the original of Bridgestone’s misrepresentations
regarding Firestone and that Firestone knew or should have known that the misrepresentation would be communicated
to investors.
No. 03-5505            City of Monroe v. Bridgestone Corp., et al.                                 Page 29


(2) the “No Loss” representation--that there were no actual, material losses connected to the lawsuits
and responses to the regulatory scrutiny of the ATX tires. A brief word is in order, though, on the
nature of these claims. Contrary to Bridgestone’s characterizations, the Retirement Fund’s theory
is not that the Complaint relies on the violation of GAAP to prove scienter. As Bridgestone
correctly points, that allegation, without more, would not be sufficient to plead scienter adequately.
See, e.g., Adams v. Standard Knitting Mills, Inc., 623 F.2d 422, 432 (6th Cir. 1980) (concluding that
although “there is sufficient evidence to support the Court’s finding that [the defendant]
inadequately tested . . . financial figures in certain respects, [ ] the evidence falls far short of proving
that [the defendant] intended to deceive the stockholders.”). Rather, GAAP is only part of the
Complaint’s explanation of the falsity of the claim: as discussed below, the Complaint alleges a
wide range of facts above and beyond the violation of GAAP on which a reasonable juror could
conclude scienter was proven. That brief detour aside, we turn to the two statements.
                        i.       Bridgestone’s Scienter as to Its “No Impairment” Representation
       As to Bridgestone’s scienter with respect to the “No Impairment” representation, we
conclude that “the most plausible of competing inferences” arising from the evidence is that
Bridgestone was at least reckless as to the falsity of that representation. Helwig, 251 F.3d at 553.
The analysis on this claim breaks down similarly to that for Firestone: four--arguably five-- of the
Helwig factors are present.
         First, and in this case most significantly, the Complaint pleads facts that, if proven, could
show a divergence between internal reports and external statements on the same subject. By the end
of 1999, consumers had filed fifty lawsuits based on alleged problems with the ATX tires against
Bridgestone or Firestone or both, thirty-four of them filed between 1997 and 1999. As former
Firestone Vice-President of Quality Assurance Robert Martin testified in his deposition, Ono, who
was Bridgestone’s Executive Vice-President in addition to his role as Firestone CEO, was a member
of the working group that from 1997 to 1999 tracked the lawsuits’ status. An 1999 internal
Firestone document included data that one of the ATX tire models--the ATX II--was the basis of the
majority of the claims against Firestone but only ten percent of its production. A reasonable juror
could conclude that this was a red flag as to problems with the tire model. Similarly, the ATX
Wilderness model experienced in 1999 a rise in claims for tire tread separations of 194% over the
previous year, another potential red flag. Thus, the facts known or available to Bridgestone were
seemingly in tension with the representation that no impairment risk of Bridgestone’s corporate
assets was substantially certain to occur through problems arising from customers or regulators’
actions and that there was no contingency risk of such a loss. Consider also Firestone’s previous
tire tread problems, fine, and massive recall, with which it is reasonable to assume, given due
diligence standards, that Bridgestone, as its suitor in a multi-billion dollar purchase the previous
decade, was aware. This history was in the known corporate background and should have made
Bridgestone more attuned to the likelihood, or at least non-trivial, contingent possibility, of a major
financial hit to Firestone as the lawsuits, settlements, and regulatory and public scrutiny surrounding
the Firestone ATX tires, as used on the Explorer, intensified from 1996 to 1999. This is particularly
so given that the Americas were Bridgestone’s largest sales market, that the North American market
was, according to Bridgestone’s Annual Reports, a major source of past and presumed future
growth, that Firestone was the primary engine fueling that growth, and that the Explorer contract
in particular was – by all appearances – a key to Firestone’s return to profitability.
        Three, arguably four, other factors are further probative of Bridgestone’s scienter, albeit with
less force than the first one. First, for the reasons just outlined, we conclude that the facts could
show that Bridgestone disregarded “the most current factual information before making statements.”
Helwig, 251 F.3d at 552. Second, the 1999 Annual Report, by combining its statement of
accounting policy with its silence, can be viewed as “disclosure of accounting information in such
a way that its negative implications could only be understood by someone with a high degree of
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                          Page 30


sophistication.” Id. Third, for the reasons discussed above with respect to Firestone, the evidence
supports a finding of “self-interested motivation of defendants in the form of saving their salaries
or jobs.” Id. Fourth, for the reasons discussed in the context of Firestone but also applicable to
Bridgestone, the existence of ancillary claims by consumers and State Farm Insurance, lawsuits, and
settlements based on claims alleging harm from unsafe ATX tires, and Firestone’s quick and secret
settlements of such claims, arguably is also probative of Bridgestone’s recklessness as to the truth
of its “No Impairment” representation.
        The four other Helwig factors admittedly are not probative of scienter. As to the “closeness
in time of an allegedly fraudulent statement or omission and the later disclosure of inconsistent
information,” Bridgestone’s statement in March 2000 occurred over four months before the
information accompanying the safety recall was disclosed, too distant in time to draw an adverse
inference. And, as discussed in the Firestone context, the Complaint does not allege insider trading
at a suspicious time or in an unusual amount, evidence of bribery by a top company official, or the
personal interest of certain directors in not informing disinterested directors of an impending sale
of stock.
         Nonetheless, considering the totality of the circumstances, in particular the divergence of
internal and external statements with respect to clearly material information going to one of
Bridgestone’s major flagship brands, “the facts argued collectively . . . give rise to a strong inference
of at least recklessness” as to the truth of its “No Impairment” representation. PR Diamonds, 364
F.3d at 691.30 The Retirement Fund has therefore adequately pleaded scienter with respect to its
claim against Bridgestone for that representation.
                           ii.       Bridgestone’s Scienter as to Its “No Loss” Representation
        We turn now to analyze whether the facts as pleaded give rise to a strong inference of
recklessness by Bridgestone as to its representation in the 1999 Annual Report that there were no
actual, material losses connected to the lawsuits and responses to the regulatory scrutiny of the ATX
tires. Again, we think the key factor here is the “divergence between internal reports and external
statements on the same subject.” Helwig, 251 F.3d at 552. As discussed, Ono, Bridgestone’s
Executive Vice-President, met at least quarterly with Firestone’s senior management group from
1997 to 1999, the financial group, the quality group, and the public relations / marketing department
and in those meetings discussed the tread-peeling claims lodged against Bridgestone (as well as
against Firestone). Assuming the truth of the Complaint’s allegations, these discussions addressed
the lawsuits, claim settlements, and informal complaints that led to investigations by governmental
authorities in Arizona, Venezuela, and Saudi Arabia, as well as the secret settlements with State
Farm under which Firestone reimbursed State Farm for accidents allegedly caused by ATX tire
failures. Ono’s   awareness of the claims as gleaned from these meetings is directly attributable to
Bridgestone31 because “knowledge of a corporate officer or agent acting within the scope of [his]
authority is attributable to the corporation.” 2 Thomas Lee Hazen, Treatise on the Law of Securities
Regulation § 12.8[4], at 444 (4th ed. 2002); cf. Adams v. Kinder-Morgan, 340 F.3d at 1106 (“[t]he
scienter of the senior controlling officers of a corporation may be attributed to the corporation itself
to establish liability as a primary violator of § 10(b) and Rule 10b-5 when those senior officials were
acting within the scope of their apparent authority.”).

         30
            Cf. In re Ford, 381 F.3d at 572 (noting, in affirming the dismissal of securities fraud claims against Ford
arising out of facts common to this case, that “it would be reasonable to expect the cost of replacing any tires would be
on Bridgestone”).
         31
           The Retirement Fund makes no serious argument that Bridgestone can be held liable for Firestone’s August 1,
2000 statement; we therefore do not address that argument. We note though that generally a subsidiary’s fraud cannot
be automatically imputed to its corporate parent. See In re Comshare, 183 F.3d at 554.
No. 03-5505                City of Monroe v. Bridgestone Corp., et al.                                           Page 31


        Two facts reinforce the notion that Bridgestone knew or should have known that it was
taking heavy losses via claims settlement resulting from alleged problems with the ATX tires. First,
Bridgestone should have been particularly attuned to the possibility of defect-caused problems from
ATX tires manufactured at the Decatur plant in light of its awareness of the strike and the
round-the-clock production schedule and the “implemented adjustments in working hours that
permit our plants to operate 24 hours a day, seven days a week” that Bridgestone’s 1996 Annual
Report trumpeted, showing that it was clearly aware of the situation. Second, a 1999 internal
Firestone report shows that the ATX II model was accounting for a quite disproportionate
percentage of claims alleging tire failure relative to its production quantity as a Firestone’s total tire
output: over 50% versus 10%.
       There is, as with the other two actionable statements and for the reasons previously stated,
evidence of the existence of ancillary lawsuits and Firestone’s quick settlement of those suits, of
disregard of the most current factual information before making statements, of disclosure of
accounting information in such a way that its negative implications could only be understood by
someone with a high degree of sophistication, and of the self-interested motivation of defendants
in the form of saving their salaries or jobs. Also like the analysis of the “No Impairment”
representation, there is a lack of probative evidence as to the remaining Helwig factors.
        Again, given this totality of circumstances, “the facts argued collectively . . . give rise to a
strong inference of at least recklessness” by Bridgestone as to the truth of its “no loss”
representation. PR Diamonds, 364 F.3d at 683. The Retirement Fund has therefore also adequately
pled scienter with respect to its claim against Bridgestone for this representation.
                   c.        Scienter as to Ono
       The Complaint attributes to Ono, as an individual corporate officer of Firestone and
Bridgestone, all of the alleged misrepresentations of those two corporate defendants. The
Retirement Fund seeks to attach liability to Ono based on his status as Firestone CEO and
Bridgestone Executive Vice-President when those two companies issued the alleged
misrepresentations. The Retirement Fund argues that “Ono is Liable for Firestone’s and
Bridgestone’s statements under the group-published doctrine and inference,” also known as the
“group-pleading” doctrine. Appellant’s Br. at 48. The district court dismissed the claim against
Ono for failure to plead scienter. Albeit for different reasons, we agree that the claim against Ono
should have been dismissed.
        At least two circuits have specifically recognized a “group pleading” exception to the
pleading-with-particularity requirements of Federal Rule Civil Procedure 9(b). See Wool v. Tandem
Computers Inc., 818 F.2d 1433, 1440 (9th Cir. 1987); Schwartz v. Celestial Seasonings, Inc., 124
F.3d 1246, 1254 (10th Cir. 1997). That exception is premised on the assumption that “[i]n cases of
corporate fraud where the false or misleading information is conveyed in prospectuses, registration
statements, annual reports, press releases, or other ‘group-published information,’ it is reasonable
to presume that these are the collective actions of the officers.” Wool, 818 F.2d at 1440.
        Firestone argues that this doctrine runs afoul of the amended pleading requirements
embodied in the Reform Act, which requires, for adequate pleading of scienter, that a federal
securities fraud complaint state the relevant facts “with particularity.” 15 U.S.C. § 78u-4(b). The
United States Court of Appeals for the Fifth Circuit and a number     of district courts have held that
the group-pleading doctrine is foreclosed by the Reform Act.32 Generally without discussion of the
effect of the Reform Act, the several circuits that embraced the group-pleading doctrine prior to the


        32
             See Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 364 (5th Cir. 2004) (collecting cases).
No. 03-5505               City of Monroe v. Bridgestone Corp., et al.                                          Page 32


passage of the Reform Act have continued to apply that doctrine since the Reform Act’s enactment.
See Howard v. Everex Sys., Inc., 228 F.3d 1057, 1061-63 (9th Cir. 2000); Schwartz, 124 F.3d at
1254. This court has not taken a position on whether such an exception exists. Courts are divided
on this issue.33
         We need not decide here the current viability of the group-published doctrine because
resolution of that question is not required to decide this case. The Complaint pleads, regarding Ono,
little more than his corporate titles, dates of employment and resignation, and attendance at the
quarterly meetings. The Retirement Fund does not allege by direct allegation or even upon
information and belief that Ono played any role in drafting, reviewing, or approving the Firestone’s
“objective data” representation or the Bridgestone annual reports, 1999 or any other years. Nor does
it allege that he was, as a matter of practice, or by job description, typically involved in the creation
of such documents. Even if we permit the group-pleading inference, these alleged facts, without
more, are not enough to attribute the alleged misstatements to Ono. See, e.g., Johnson v. Tellabs,
Inc., 262 F. Supp. 2d 937, 946-47 (N.D. Ill. 2003) ( “Even if the group pleading doctrine survives
the [Reform Act], . . . . [a] plaintiff is . . . required at least to include allegations . . . relating to an
individual defendant’s duties . . . that create a presumption that the company’s statement was
somehow . . . attributable to an individual defendant. Simply alleging an individual defendant’s title
is not enough.”); In re Baan Co., 103 F. Supp. 2d at 18 (noting that to satisfy the group-pleading
doctrine, a complaint “must identify the roles of the individual defendants, and describe their
involvement, if any, in preparing the misleading statements”). Accordingly, we34conclude that the
district court did not err in dismissing the claims in the Complaint against Ono.
                                               III. CONCLUSION
         To summarize, we hold that: (1) the district court did not err in granting Kaizaki’s motion
to dismiss for lack of personal jurisdiction; (2) because the Complaint, for Firestone’s August 1,
2000 statement that “[w]e continually monitor the performance of all our tire lines, and the objective
data clearly reinforces our belief that these are high-quality, safe tires,” adequately alleges an
actionable statement and scienter against Firestone, the district court erred in dismissing the claim
based on that statement; (3) the district court did not err in dismissing the claims against Firestone
for its numerous other statements because those statements were not material; (4) the district court
erred in dismissing the claims against Bridgestone based on two of its effective representations in
the 1999 Annual Report--(i) that no impairment of Bridgestone’s corporate assets was substantially
certain to occur through problems arising from customers or regulators’ actions, and (ii) that there
were no actual, material losses connected to the lawsuits and responses to the regulatory scrutiny
of the ATX tires--because for those representations, the Complaint adequately pled an actionable
statement and scienter against Bridgestone; (5) the district court did not err in dismissing the claims
based on Bridgestone’s representations in the financial statements of the 1996-1998 Annual Reports
because those statements were not misrepresentations; and (6) the district court did not err in



         33
            Compare, e.g., In re SmarTalk Teleservices, Inc. Sec. Litig., 124 F. Supp. 2d 527, 545 (S.D. Ohio 2000); In
re Raytheon Sec. Litig., 157 F. Supp. 2d 131, 152-53 (D. Mass. 2001); In re Baan, 103 F. Supp. 2d 1, 17 (D.D.C. 2000);
In re Sunbeam Sec. Litig., 89 F. Supp. 2d 1326, 1340-41 (S.D. Fla. 1999); In re Stratosphere Corp. Sec. Litig., 1 F. Supp.
2d 1096, 1108 (D. Nev. 1998) (holding that the group pleading doctrine survived the enactment of the Reform Act), with
In re Miller Indus., Inc. Sec. Litig., 12 F. Supp. 2d 1323, 1329 (N.D. Ga. 1998); Allison v. Brooktree Corp., 999 F. Supp.
1342, 1350 (S.D. Cal. 1998) (holding that the Reform Act abolished the group pleading doctrine).
         34
            At first glance, it might seem incongruous to reach this conclusion after relying in part on Ono’s knowledge
of the claims settlements as a basis for Bridgestone’s scienter on that claim. However, while an individual officer’s
knowledge may be attributed to the corporation, liability for the corporation’s act does not, absent independent evidence,
generally flow from the corporation to the corporate officer.
No. 03-5505                City of Monroe v. Bridgestone Corp., et al.                                             Page 33


dismissing the claims against Ono. We therefore need not reach any of the district court’s additional
rulings.35
        To withstand the 12(b)(6) motions by Bridgestone and Firestone, the Retirement Fund must
for each alleged misrepresentation have adequately alleged five elements: (1) a misrepresentation
or omission; (2) of a material fact that the defendant had a duty to disclose; (3) made with scienter;
(4) justifiably relied on by plaintiffs; and (5) proximately causing them injury. In addition to
dismissing the claim against Kaizaki for lack of personal jurisdiction, the district court in its 12(b)(6)
analysis held that the Complaint did not satisfy the first three elements as against Bridgestone,
Firestone, and Ono, holdings as to which, as just summarized, we reverse with respect to
Bridgestone and Firestone and affirm as to Ono. The district court did not address the final two of
the five requisite elements: justifiable reliance and proximate cause. The parties’ briefs did not
address these elements on appeal. As a “‘general rule . . . a federal appellate court does not consider
an issue not passed upon below.’” Pinney Dock & Transport Co., 838 F.2d 1445, 1461 (6th Cir.
1988) (quoting Singleton v. Wulff, 428 U.S. 106, 120 (1976)). We see no special reason to do so
here. Consequently, we remand to the district court to consider whether the Complaint adequately
pleads justifiable reliance and proximate cause with respect to the three actionable statements as
against Bridgestone and Firestone, and for further proceedings not inconsistent with this opinion.
         AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.




         35
             In connection with the defendants’ motions to dismiss, the district court issued two rulings in addition to those
discussed in the opinion, neither of which we need to analyze. First, the district court denied Bridgestone’s motion to
dismiss for lack of personal jurisdiction. See App. at 987-97 (Dist. Ct. Mem.). Because Bridgestone does not
cross-appeal, we do not address this aspect of the district court’s ruling. See Spann v. Colonial Village, Inc., 899 F.2d
24, 35 (D.C. Cir. 1990) (Ginsburg, R.B., J.) (noting that objections to “personal jurisdiction . . . can be waived at any
stage of a proceeding and ordinarily are waived by failure to take a cross-appeal”) (citing United States v. American Ry.
Express Co., 265 U.S. 425, 435-36 n.11 (1924)). Second, although the district court did not enter a Judgment in concert
with its September 30, 2002 Order granting the several motions to dismiss, the Retirement Fund treated the district
court’s dismissal Order as a Judgment and, accordingly, on October 16, 2002, timely filed a motion pursuant to Federal
Rule of Civil Procedure 59(e) to alter or amend the Judgment or in the alternative for leave to file a Proposed Amended
Consolidated Complaint, which the Retirement Fund attached to its Rule 59(e) motion, along with numerous proposed
exhibits. See App. at 1039-1319. On February 25, 2003, the district court denied that motion on the grounds of undue
delay and futility. See id. at 1446-58. Because we have resolved the appeal on the question of whether the district
court’s initial dismissal was correct, the question of whether the district court also erred in its denial of the motion for
leave to amend is moot. We therefore do not address it.
