United States Court of Appeals For the First Circuit

No. 23-1843

SOPHIA ZHOU, individually and on behalf of all others similarly situated,

Plaintiff, Appellant,

NICHOLAS LUONGO, individually and on behalf of all others similarly situated; YICHUN XIE, individually and on behalf of all others similarly situated; GREGORY HATHAWAY, individually and on behalf of all others similarly situated; OSCAR GUZMAN-MARTINEZ, individually and on behalf of all others similarly situated,

Plaintiffs,

v.

DESKTOP METAL, INC.; RIC FULOP; ALI EL-SIBLANI; and MICHAEL JAFAR,

Defendants, Appellees,

JAMES HALEY,

Defendant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Indira Talwani, U.S. District Judge]

Before

Gelpí, Montecalvo, and Rikelman, Circuit Judges.

Lucas E. Gilmore, with whom Steve W. Berman, Kevin K. Green, Raffi Melanson, and Hagens Berman Sobol Shapiro LLP were on brief, for appellant.

Roman Martinez, with whom Kristin N. Murphy, William J. Trach, Jeff G. Hammel, and Latham & Watkins LLP were on brief, for appellees.

October 28, 2024 RIKELMAN, Circuit Judge. Sophia Zhou and other

investors brought a federal securities fraud class action against

Desktop Metal, Inc. and several of its corporate officers,

following a drop in the price of Desktop Metal's stock in late

2021. The stock lost value after Desktop Metal publicly shared

the results of an internal investigation, which uncovered

corporate mismanagement and required recall of two key products.

In a thorough opinion, the district court dismissed

Zhou's complaint for failure to state a claim. Zhou appeals,

contending the court made two mistakes. First, she argues that

defendants' motion to dismiss targeted only her material

misrepresentations and omissions claim and, therefore, the

district court erred in dismissing her entirely separate "scheme

liability" claim. Second, she insists that, in any event, she did

adequately state a securities fraud claim based on defendants'

material misrepresentations and omissions. On de novo review, we

conclude that Zhou did not preserve a scheme liability claim and

that the district court correctly determined that the complaint

failed to plead any materially false or misleading statement or

omission. We therefore affirm the district court's ruling.

I. BACKGROUND

A. Relevant Facts

We draw the facts from the complaint, taking the

well-pleaded facts as true and construing all reasonable

- 3 - inferences in Zhou's favor. Lawrence Gen. Hosp. v. Cont'l Cas.

Co.,

(1st Cir. 2024) (quoting Lanza v. Fin.

Indus. Regul. Auth.,

, 161 (1st Cir. 2020)).

1. Desktop Metal's Acquisition of EnvisionTEC

Desktop Metal is a publicly traded company that

specializes in 3D printing. 3D printing does not involve printing

per se; instead, it is the process of creating a three-dimensional

object layer-by-layer, joining each layer to the layer below it

during manufacturing. Defendant Ric Fulop was the Chief Executive

Officer ("CEO") of Desktop Metal during the time period at issue

in this case.

In February 2021, Desktop Metal acquired EnvisionTEC,

Inc., a company specializing in 3D printing solutions for medical,

dental, and industrial markets. Defendant Ali El-Siblani was the

co-founder and CEO of EnvisionTEC prior to the acquisition. Under

the acquisition's terms, El-Siblani became a director of Desktop

Metal and remained the CEO of EnvisionTEC, which became a fully

owned subsidiary of Desktop Metal.

After acquiring EnvisionTEC, Desktop Metal created a new

division, Desktop Health, covering Desktop Metal's medical and

dental device portfolio, including EnvisionTEC's dental

technology. When Desktop Health was announced on March 15, 2021,

Desktop Metal brought on defendant Michael Jafar to serve as

Desktop Health's President and CEO.

- 4 - 2. EnvisionTEC's Dental Portfolio

In early 2021, Desktop Metal repeatedly highlighted the

advantages of acquiring EnvisionTEC's photopolymer 3D printing

technologies, particularly its dental device portfolio. At that

time, EnvisionTEC was a leader in photopolymer printing, a 3D

printing process that uses light to cure, or harden, liquid

photopolymer resin. According to Desktop Metal, EnvisionTEC was

poised to become a leader in the dental market as well.

To create its dental products, EnvisionTEC used Digital

Light Printing ("DLP"), a process that involves three steps.

First, a user sends printing instructions to a 3D printer, which

creates the object (e.g., denture teeth and denture bases) using

a biocompatible material (typically resin). Second, the user

cleans the object to remove excess resin. Third, the user inserts

the object into a curing unit, which uses light to harden the

object. EnvisionTEC sold -- and now Desktop Metal sells -- all

the components of the process: the printers, the biocompatible

materials, and the curing units.

At the center of this litigation are two products that

were part of Desktop Health/EnvisionTEC's dental portfolio at the

time. The first product was really a group of products:

EnvisionTEC's proprietary resins used for 3D printing dentures and

teeth, specifically Flexcera Smile (for denture teeth) and

Flexcera Base (for denture bases). In March 2021, Desktop Metal

- 5 - applied for 510(k) clearance from the Food and Drug Administration

("FDA") to market the Flexcera products for permanent use by

patients. 510(k) clearance refers to a section of the Federal

Food, Drug, and Cosmetic Act,

et seq., which

permits the FDA to "'clear' a device that is substantially

equivalent in safety and effectiveness to an existing approved

device and thereby allow the device to be used for the same

intended purposes." Fire & Police Pension Ass'n of Colo. v.

Abiomed, Inc.,

(1st Cir. 2015). On May 12, 2021,

Desktop Metal announced that it had received that FDA clearance.

The second product that features in this case is the PCA

4000 curing box, used in the third step of the DLP printing

process. In 2021, EnvisionTEC sold the Otoflash curing box, which

was considered the gold standard for 3D printed medical devices

and which EnvisionTEC purchased from a manufacturer, rebranded,

and sold at a markup. EnvisionTEC also manufactured and sold its

own line of curing boxes, known as the PCA series. In late 2020

or early 2021, EnvisionTEC began selling the PCA model at issue

here: the PCA 4000.

3. The Alleged Fraud Schemes

Zhou alleges that defendants carried out two fraudulent

schemes. First, she claims that defendants instructed staff to

manufacture Flexcera at facilities that were not registered with

the FDA and then conceal that unlawful activity by repackaging the

- 6 - Flexcera with false labels. Second, Zhou alleges that in spring

2021, defendants marketed their PCA 4000 curing box for use with

Flexcera, even though it had not been certified by the FDA for

that use.

The first scheme involved the alleged violation of the

FDA's establishment registration and labeling requirements. The

FDA mandates that owners or operators of establishments involved

in the production and distribution of medical devices intended for

use in the United States register those establishments with the

FDA -- a requirement known as establishment registration. See

generally 21 C.F.R. pt. 807. As part of establishment

registration, owners or operators must provide information about

the medical devices produced at an establishment. See

. The FDA also requires that medical device labels

"specify conspicuously the name and place of business of the

manufacturer, packer, or distributor."

(a). It

is unlawful to introduce or deliver for introduction into

interstate commerce a device that is "misbranded," see

(a), including one that is misbranded because its "labeling

is false or misleading," see

(a)(1).

In compliance with the establishment registration

requirement, EnvisionTEC registered two facilities for the

manufacture of medical devices -- a facility in Gladbeck, Germany,

- 7 - and its U.S. headquarters in Dearborn, Michigan.1 But, at the

time, only the Gladbeck facility was registered to manufacture

dental resins specifically. EnvisionTEC also had a facility in

Montreal, Canada, which was not registered with the FDA.

EnvisionTEC generally manufactured resins that do not require FDA

registration at its Canada facility.

In early spring 2021, El-Siblani instructed staff to

begin producing the Flexcera resin in Montreal, and in April or

May 2021, El-Siblani instructed the head chemist at the Montreal

facility to "up his production" of Flexcera resin. Flexcera resin

manufactured in Montreal was then shipped to the Michigan facility,

where staff repackaged the resin and improperly labeled it "as

being of German origin." As a result, Desktop Metal sold non-FDA

compliant Flexcera resin from April 2021 through October 2021.

According to Zhou, the non-compliant resin made up at least 10% of

all Flexcera resin sales during that period.

The second scheme Zhou alleges focuses on the spring

2021 marketing of the PCA 4000 curing box for use with Flexcera.

At that time, the FDA had not cleared the PCA 4000 for use with 3D

printed medical devices, and Desktop Metal's application for FDA

510(k) clearance of Flexcera had relied on results from Flexcera

1 Even after Desktop Metal acquired EnvisionTEC, EnvisionTEC's

operations continued to operate under the trade name "EnvisionTEC" for purposes of FDA registration.

- 8 - products cured with the Otoflash, not the PCA 4000. Nonetheless,

in March 2021, El-Siblani instructed the sales team to sell the

PCA 4000 as the default curing unit for EnvisionTEC dental resins.

The marketing continued even though both employees and

customers voiced concerns about Flexcera products cured with the

PCA 4000. In a sales team call with El-Siblani, employees

questioned whether the PCA 4000 was strong enough to cure Flexcera

products and whether the FDA had certified this use of the PCA

4000. El-Siblani instructed the sales team to sell the PCA 4000

over those concerns. Similarly, staff at the German facility found

the PCA 4000 was not compatible with curing Flexcera resin during

testing, at least at the curing times that Desktop Metal

recommended in its instructions to customers. And, customer

feedback after Desktop Metal began selling the PCA 4000 indicated

that the PCA 4000 was, in fact, not curing Flexcera products

sufficiently. Customers complained that Flexcera cured with the

PCA 4000 was coming out "gummy.” Finally, independent testing

revealed issues with the strength of Flexcera products cured with

the PCA 4000, which an external researcher reported to Desktop

Metal leadership, including Jafar, in an email.

4. The Whistleblower Complaint and Product Recalls

In early November 2021, Desktop Metal employees emailed

high-level individuals across various departments of the company,

including Human Resources and Operations, with concerns about the

- 9 - production and bottling of non-FDA-compliant resin. In response,

Desktop Metal hired a third party to conduct an independent

investigation into "manufacturing and product compliance practices

and procedures with respect to a subset of its photopolymer

equipment and materials at its EnvisionTEC US LLC facility."

Desktop Metal filed a Form 8-K with the Securities and Exchange

Commission ("SEC") on November 8, 2021, disclosing the

investigation. On the same day, Desktop Metal filed a separate

Form 8-K disclosing that El-Siblani had resigned as CEO of

EnvisionTEC and as a director of Desktop Metal on November 5, 2021.

Desktop Metal's stock price fell about 10% after these disclosures.

A week later, Desktop Metal announced that it had

decided to notify the FDA about compliance issues with Flexcera

resin and the PCA 4000. After making this announcement on November

15, 2021, its stock price fell again, by about 15%.

Desktop Metal ultimately initiated two recalls with the

FDA in January 2022 -- one for the Flexcera Smile resin

manufactured from April 1, 2021, to September 15, 2021, and one

for PCA 4000 curing units sold to non-industrial users. Desktop

Metal also notified direct accounts of EnvisionTEC to "stop

utilizing the PCA 4000 to print medical devices made from

EnvisionTEC dental resins."

- 10 - B. Procedural History

This appeal arises from a consolidated class action.

After considering competing motions for appointment of lead

plaintiff, the district court severed one of the actions, brought

by Yichun Xie; appointed Xie as the lead plaintiff of the severed

action; and appointed Zhou as the lead plaintiff of the

consolidated action. The district court also determined the class

period for the Zhou consolidated action would be February 17, 2021,

through November 15, 2021.2

That brings us to the complaint at issue in this case.

In that complaint, Zhou brought securities fraud claims under

sections 10(b) and 20(a) of the Securities Exchange Act of 1934,

15 U.S.C. § 78a et seq., and SEC Rule 10b-5,

.10b-5.

Defendants moved to dismiss the consolidated complaint for failure

to state a claim pursuant to the Private Securities Litigation

Reform Act ("PSLRA"), 15 U.S.C. § 78u-4, and Rules 9(b) and

12(b)(6) of the Federal Rules of Civil Procedure. The district

court granted the motion to dismiss Zhou's complaint in its

entirety. Luongo v. Desktop Metal, Inc., No. 1:21-CV-12099,

, at *1 (D. Mass. Sept. 20, 2023). Zhou timely appealed.3

2 The actions were later re-consolidated for the purpose of pretrial proceedings. But we focus only on Zhou's claims in deciding this appeal. 3 Because only Zhou appealed, our review is limited to the portions of the district court's order directed at Zhou's claims.

- 11 - II. STANDARD OF REVIEW

We review de novo a district court's decision to grant

a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).

Lawrence Gen. Hosp.,

. Because Zhou brought federal

securities fraud claims, several additional legal standards apply.

We must evaluate Zhou's complaint to determine whether the

allegations of securities fraud have been pled sufficiently to

satisfy the requirements of both the PSLRA and Rule 9(b) of the

Federal Rules of Civil Procedure. Hill v. Gozani,

(1st Cir. 2011).

As with any motion to dismiss under Rule 12(b)(6), we

"accept well-pleaded factual allegations in [Zhou's] complaint as

true and view all reasonable inferences in [her] favor." ACA Fin.

Guar. Corp. v. Advest, Inc.,

, 58 (1st Cir. 2008). We

affirm the district court's dismissal if the complaint fails to

"allege facts sufficient to demonstrate 'a plausible entitlement

to relief.'" Hill,

(quoting Bell Atl. Corp. v.

Twombly,

(2007)).

To state a section 10(b) and Rule 10b-5 violation, Zhou's

complaint must allege six elements: (1) a "device, scheme, or

artifice" employed to defraud; a material misrepresentation or

omission; or an "act, practice, or course of business which

operates or would operate as a fraud or deceit upon any person";

(2) scienter, or a wrongful state of mind; (3) a connection with

- 12 - the purchase or sale of a security; (4) reliance; (5) economic

loss; and (6) loss causation.

.10b-5; ACA Fin.

Guar., 512 F.3d at 58. The district court was bound to dismiss

Zhou's complaint if she failed to allege any one of these elements.

Further, under Rule 9(b), as with all fraud claims, Zhou

is required to plead the circumstances of the securities fraud

with particularity. Hill,

. And, under the PSLRA,

she must "specify each statement alleged to have been misleading

[and] the reason or reasons why the statement is misleading." ACA

Fin. Guar., 512 F.3d at 58 (modification in original) (quoting 15

U.S.C. § 78u-4(b)(1)).

"The PSLRA also separately imposes a rigorous pleading

standard on allegations of scienter." Id. "A complaint will

survive a motion to dismiss only if it states with particularity

facts giving rise to a 'strong inference' that defendants acted

with a conscious intent 'to deceive or defraud investors by

controlling or artificially affecting the price of securities' or

'acted with a high degree of recklessness.'" Abiomed,

(quoting City of Dearborn Heights Act 345 Police & Fire Ret.

Sys. v. Waters Corp.,

(1st Cir. 2011)).

III. DISCUSSION

A. Scheme Liability

We turn first to whether Zhou has preserved a scheme

liability claim. According to Zhou, she adequately argued to the

- 13 - district court that defendants' motion to dismiss failed to address

her separate scheme liability claim under Rule 10b-5. We disagree.

"It is hornbook law that theories not raised squarely in

the district court cannot be surfaced for the first time on

appeal." McCoy v. Mass. Inst. of Tech.,

(1st Cir.

1991). To preserve a claim for appeal, a party cannot "merely

. . . mention a possible argument in the most skeletal way" to the

district court -- parties have the duty to spell out their

arguments "squarely and distinctly." United States v. Zannino,

(1st Cir. 1990); Rivera-Gomez v. de Castro,

(1st Cir. 1988). We determine as a matter of law

whether a party has sufficiently developed its claim before the

district court, such that the claim is preserved for appeal. See,

e.g., McCoy,

; Iverson v. City of Bos.,

(1st Cir. 2006).4

4 Defendants argue that we should review the district court's implicit determination that Zhou had forfeited her scheme liability claim for an abuse of discretion. In support, they cite our decision in Curet-Velázquez v. ACEMLA de Puerto Rico, Inc.,

(1st Cir. 2011). However, that case describes our standard of review of a "district court's conclusion that a party has waived an issue by failing to adequately assert it before the magistrate judge."

. Here, the district court decided the motion to dismiss in the first instance and never explicitly ruled that Zhou forfeited her scheme liability claim, although the court pointed out that Zhou did not raise that theory in her brief and thus left open the door for Zhou to follow up on any scheme liability claim after oral argument. Regardless, Curet-Velázquez does not provide the correct standard of review for this appeal.

- 14 - Here, Zhou brought up the scheme liability claim in a

"skeletal" way, at best. When defendants filed their motion to

dismiss, they requested that the district court dismiss Zhou's

complaint in full. They argued in their motion that Zhou had

"fail[ed] to plead a claim for violations of Section 10(b) of the

Securities Exchange Act of 1934 and Rule 10b-5 promulgated

thereunder." Yet, in her opposition brief, Zhou did not argue or

even suggest that the district court should not dismiss all of her

complaint because defendants had failed to address one of her key

claims -- scheme liability. In the normal course, a court would

expect such an argument to feature prominently in the opposition

to a motion to dismiss. And the burden was on Zhou to set out

this argument in her responsive brief. See Mancini v. City of

Providence by & through Lombardi,

(1st Cir. 2018)

(explaining we would not review a claim that plaintiff failed to

explicitly reference or develop in summary judgment briefing);

McCoy,

n.7 ("Courts are entitled to expect

represented parties to incorporate all relevant arguments in the

papers that directly address a pending motion.").

Zhou contends that her failure to make any argument about

scheme liability in her response to defendants' motion to dismiss

should not be fatal. According to Zhou, she clearly stated the

scheme liability claim in Count III of her complaint, thus it was

defendants' burden to address that claim in their motion, and she

- 15 - should not be faulted for their strategic oversight in not doing

so.

To understand Zhou's argument, it is helpful to review

the text of Rule 10b-5. Rule 10b-5 makes it unlawful

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or 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, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

.10b-5.5 Claims under Rule 10b-5(a) and (c) often

overlap and are called "scheme liability" claims. See Lorenzo v.

SEC,

(2019).

Zhou asserts that in her complaint, she alleged both a

claim for material misrepresentations or omissions under Rule

10b-5(b) and a claim for scheme liability under Rule 10b-5(a) and

(c). Because, as she explains, defendants' motion to dismiss was

directed only at the material misrepresentations or omissions

Rule 10b-5 itself does not make any conduct unlawful but 5

rather "encompasses only conduct already prohibited by § 10(b)." Stoneridge Inv. Partners, LLC v. Sci.-Atlanta,

(2008).

- 16 - claim, the district court erred in "sua sponte" dismissing the

scheme liability claim.

In contending that she did not need to brief scheme

liability in her response to the motion to dismiss, Zhou relies

primarily on the party presentation principle. Zhou maintains

that the district court violated this principle by dismissing her

entire complaint in these circumstances.

We are unpersuaded. None of the cases Zhou relies on

support her position. Zhou initially cites two Supreme Court

decisions, but these cases stand only for the basic rule that our

adversarial system depends on the parties to advance the "facts

and arguments [that] entitl[e] them to relief." Greenlaw v. United

States,

(2008) (citation omitted); United States

v. Sineneng-Smith,

(2020). Applying this

rule, the Supreme Court in Sineneng-Smith held that a court of

appeals abused its discretion when, "[i]nstead of adjudicating the

case presented by the parties, . . . [it] named three amici and

invited them to brief and argue issues framed by the panel,

including a question [not raised by either party.]"

. In Greenlaw, the Supreme Court relied in part on the party

presentation principle to hold that a court of appeals was not

warranted in extending the defendant's sentence in a case where

the defendant appealed, arguing his sentence was too long, and the

government had not cross-appealed.

. Neither of

- 17 - these cases suggests the district court made any error here -- it

dismissed the entire complaint only after defendants requested

that exact relief.

Indeed, accepting Zhou's position arguably would turn

the party presentation principle on its head. In Zhou's view, the

district court had the obligation, when faced with a motion to

dismiss her entire complaint, to comb through all 200 pages for

any plausibly alleged legal theory and assess whether defendants

adequately addressed each theory regardless of whether Zhou raised

it in her own responsive brief. This would be unworkable to say

the least -- we require parties to make their arguments squarely

and distinctly to the district court precisely because

"[o]verburdened trial judges cannot be expected to be mind

readers." McCoy,

.

Zhou also points to three out-of-circuit securities

fraud cases to support her position that it was defendants' burden

to address any scheme liability claim in their motion to dismiss,

but the facts of those cases are different in important ways. For

example, the United States Court of Appeals for the Ninth Circuit

recently held that Rhode Island had not waived a scheme liability

claim by failing to use the specific phrase "scheme liability" or

citing to Rule 10b-5(a) and (c) in its opposition to a motion to

dismiss. In re Alphabet, Inc. Sec. Litig.,

(9th Cir.

2021). As the Ninth Circuit explained, "because [the] motion to

- 18 - dismiss did not target Rhode Island's Rule 10b-5(a) and (c) claims,

Rhode Island did not waive those claims by failing to address them"

head on in its responsive brief.

. Like here,

defendants' motion to dismiss in Alphabet was directed at Rhode

Island's entire complaint. Mot. to Dismiss at 18, In re Alphabet,

Inc. Sec. Litig., No. 18-CV-06245 (N.D. Cal. Feb. 5, 2020),

. But, critically, Rhode Island had argued in its

opposition brief filed with the district court that defendants'

motion was "limited to only one aspect of [its] allegations."

Pl.'s Opp'n to Mot. to Dismiss at 7, In re Alphabet, Inc. Sec.

Litig., No. 18-CV-06245 (N.D. Cal. Feb 5, 2020),

(cleaned up). Although Rhode Island did not reference Rule

10b-5(a) or (c) or "scheme liability" explicitly, it did refer to

the paragraphs in its complaint that it later tied to its scheme

liability claim in its brief to the Ninth Circuit. Id.; see also

Appellant's Opening Br. at 24-31, In re Alphabet, Inc. Sec. Litig.,

(9th Cir. 2021) No. 20-15638,

. Thus,

Rhode Island did not leave the district court to "ferret out” its

potential legal claims. Rivera-Gomez,

.

The second case Zhou cites is even less on point

factually. See Burt v. Maasberg, No. CIV.A. 12-0464,

(D. Md. Mar. 28, 2014). In Burt, the district court found

that plaintiffs' claims under Rule 10b-5(b) as well as their claims

under Rule 10b-5(a) and (c) survived the motion to dismiss.

- 19 - at *2. But there, plaintiffs had explicitly argued in their

opposition brief that allegations in their complaint established

separate violations of each subpart of Rule 10b-5. Pl.'s Opp'n to

Mot. to Dismiss at 17-27, Burt v. Maasberg, No. CIV.A. 12-0464 (D.

Md. Mar. 28, 2014),

. In its opinion, the district

court noted that the defendant had failed to offer any argument

about plaintiffs' Rule 10b-5(a) and (c) claims in its reply. Burt,

at *24-25.

The final case Zhou relies on is also readily

distinguishable. See Ansell v. Laikin, No. CV 10-9292,

(C.D. Cal. Aug. 1, 2011). In Ansell, the district court

held that plaintiffs' Rule 10b-5(a) and (c) and Rule 10b-5(b)

claims survived the motion to dismiss when plaintiffs alleged those

claims in two separate counts of their complaint, and their

opposition to the motion to dismiss laid out a stock manipulation

scheme under Rule 10b-5(a) and (c) and a distinct false statements

of material fact claim under Rule 10b-5(b). Id. at *3, 6; see

also Compl. at 28-32, Ansell v. Laikin, No. CV 10-9292 (C.D. Cal.

Aug. 1, 2011),

; Opp'n to Mot. to Dismiss at 10-13,

Ansell v. Laikin, No. CV 10-9292 (C.D. Cal. Aug. 1, 2011), ECF No.

42.

Unlike the plaintiffs in Alphabet, Burt, and Ansell,

Zhou did not use her responsive brief to argue that the motion to

dismiss failed to address all her claims or to expound on her

- 20 - scheme liability claim. Thus, these cases do not support a

conclusion that she preserved this claim.

In her final argument about scheme liability, Zhou

contends that, even putting her responsive brief to the side, she

sufficiently flagged this claim in a supplemental brief requested

by the district court and during oral argument on the motion to

dismiss. Again, we disagree.

As for the supplemental briefing, the district court

requested that the parties address our decision in Abiomed -- a

case that primarily discussed the scienter pleading requirement

for Rule 10b-5(b) claims. See

.6 (Thus, the

requested supplemental briefing was in no way about scheme

liability.) In her supplemental brief, Zhou referenced Rule

10b-5(a) and (c) claims in one clause in one sentence, stating our

decision in Abiomed "suggests that this Court should uphold

Plaintiffs' Rule 10b-5(b) and Rule 10b-5(a) & (c) claims." This

passing reference to subsections (a) and (c) in a brief addressing

an entirely different issue does not constitute a developed

argument sufficient to preserve a scheme liability claim.

6The plaintiffs in Abiomed also alleged a scheme liability claim involving the marketing of defendants' heart pump. See Simon v. Abiomed, Inc.,

(D. Mass. 2014), aff'd sub nom. Abiomed,

. Because the plaintiffs' scheme liability and material misrepresentations or omissions claims turned on the same allegedly false or misleading statements, our scienter analysis focused on those statements. Abiomed,

.

- 21 - Finally, Zhou points to her statement at the very end of

oral argument on the motion to dismiss that the complaint included

a scheme liability claim, which "was not fully briefed before the

Court." When the district court asked why the claim was not in

the motion to dismiss briefing, Zhou explained that "it was not

challenged by defendant[s] in their motion to dismiss."

Even assuming it was not too late to raise her scheme

liability argument at the hearing on the motion to dismiss, this

short statement did not meet Zhou's burden to "spell out" her

argument for the district court. See Iverson,

.

Zhou's one-sentence assertion was at least as underdeveloped as

other arguments we have concluded were not preserved. See, e.g.,

McCoy,

(plaintiffs that "failed to provide any

analysis of the statutory scheme[] [or] present any legal authority

directly supporting their thesis" to the district court had not

preserved the argument for appellate review); Cámara de Mercadeo,

Industria y Distribución de Alimentos, Inc. v.

Emanuelli-Hernández,

(1st Cir. 2023) (party that

argued to district court that regulations were null and void

because they had not been approved by the appropriate body but

failed to develop that argument with any supporting law failed to

preserve that argument for appeal). For instance, Zhou did not

explain why the motion to dismiss should be understood, despite

its language, to be directed only at a portion of her complaint.

- 22 - Nor did she attempt to develop her argument in a motion for

reconsideration after the district court dismissed the complaint

in its entirety.7 Cf. Rivera-Gomez,

(argument

developed in the motion for reconsideration was preserved for

appeal).

Thus, we conclude that Zhou did not preserve a scheme

liability claim at the district court. For that reason, we need

not address any argument about whether she adequately pled such a

claim.

B. Material Misrepresentations or Omissions

Next, we turn to whether the district court properly

dismissed Zhou's Rule 10b-5(b) claim for failure to plead material

misrepresentations or omissions. Zhou argues that she adequately

alleged that several of defendants' statements and omissions about

their dental products were materially false or misleading. As we

explain below, we disagree.

Rule 10b-5(b) makes it unlawful to, in connection with

the purchase or sale of a security, "make any untrue statement of

a material fact or to omit to state a material fact necessary in

7 Even if Zhou originally was under the impression that the district court shared her view that the motion to dismiss was limited to the material misrepresentations or omissions claim, Zhou should have understood that was not the court's view after oral argument -- when the court stated that defendants' motion "was to dismiss the entire complaint" -- or, at the very latest, when the court dismissed the complaint in full.

- 23 - order to make the statements made, in the light of the

circumstances under which they were made, not misleading."

.10b–5(b). A fact or omission is material if "a

reasonable investor would have viewed it as having significantly

altered the total mix of information made available." Ponsa-Rabell

v. Santander Sec. LLC,

(1st Cir. 2022) (internal

quotation marks omitted) (quoting Miss. Pub. Emps.' Ret. Sys. v.

Bos. Sci. Corp.,

(1st Cir. 2008)).

Importantly, section 10(b) and Rule 10b-5 only prohibit

omissions that engender "half-truths." Macquarie Infrastructure

v. Moab Partners, L. P.,

, 263 (2024). That is because

section 10(b) and Rule 10b-5 "do not create an affirmative duty to

disclose any and all material information." Matrixx Initiatives,

Inc. v. Siracusano,

(2011). An omission, even if

material, is actionable only if it "renders affirmative statements

made misleading." Macquarie Infrastructure, 601 U.S. at 265; In

re Bos. Sci. Corp. Sec. Litig.,

(1st Cir. 2012).

With this framework in mind, we turn to the specific

allegations of materially false or misleading statements in Zhou's

complaint. Although Zhou alleges that dozens of the statements

made during the class period were false or misleading, we address

only the statements that she focuses on in her appellate brief.

Those statements fall into two categories: (1) statements that

allegedly misled investors into believing that Flexcera production

- 24 - complied with FDA regulations; and (2) statements that allegedly

misled investors into believing that Flexcera resins could achieve

specific attributes using the PCA 4000. At the end of the day, we

agree with the district court that Zhou has not alleged a

materially false or misleading statement in either category.

1. Statements About FDA Compliance

Zhou claims that three of defendants' statements are

either false or rendered misleading by defendants' failure to

disclose that EnvisionTEC produced Flexcera in facilities that

were not registered with the FDA.8 They are:

• statements on Desktop Metal's website throughout portions of

the class period that Flexcera Base is "an FDA 510(k) Cleared

Class 2 Medical Device" and Flexcera Smile is "an FDA Class

1 Medical Device";

• statements in Desktop Metal's quarterly report that Desktop

Health products -- i.e., the company's medical and dental

8Although Zhou quotes only three statements in this category, she cites nearly every statement from her class period in a string cite to support the proposition that "the industry standard [for regulatory compliance], as Defendants repeatedly stated here, is nothing less than full compliance." None of the statements reference the industry standard for compliance, much less support the assertion that defendants claimed that the industry standard was 100% compliance. Absent any other explanation for why these statements are misleading, Zhou's mere citation to these statements is insufficient to put them at issue on appeal. See Zannino,

(describing the "settled appellate rule that issues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived").

- 25 - products -- were subject to extensive regulations and that

noncompliance "would have an adverse impact on [Desktop

Metal's] business and reputation"; and

• Fulop's statement during an earnings call on August 11, 2021,

that "Flexcera solutions sold out within the first four weeks

of launch, and we're adding capacity to meet the robust

demand."

When a plaintiff alleges multiple false or misleading

statements, we perform our analysis statement by statement,

considering each statement in turn. See Hill,

; see

also 15 U.S.C. § 78u-4(b)(1) (requiring a securities fraud

complaint to specify each misleading statement and the reason(s)

why that statement is misleading). In conducting this analysis,

we evaluate "[t]he immediate context of each statement -- namely,

the balance of what was said on the particular occasion, and the

immediate circumstances in which the particular statement was

made." Shash v. Biogen,

, 101 (D. Mass. 2022),

aff'd in part, rev'd in part and remanded,

(1st Cir.

2023) (quoting In re Bos. Tech., Inc. Sec. Litig.,

(D. Mass. 1998)).

First, we conclude that Zhou has not plausibly alleged

that the statement regarding Flexcera's 510(k) clearance was

either false or misleading. Zhou's complaint acknowledges that

Flexcera was cleared by the FDA in May 2021, and she does not

- 26 - allege that Desktop Metal published this statement before the

clearance date. Accordingly, Zhou has failed to allege that the

website statement is itself false. Nor has Zhou explained why

Desktop Metal's failure to disclose that Flexcera was being

produced in a facility not registered with the FDA rendered the

website statement "so incomplete as to mislead." See In re Bos.

Sci. Corp. Sec. Litig.,

(citing Hill,

). Zhou has not argued that noncompliance with the FDA's

establishment registration requirement affected 510(k) clearance.

Thus, she has not connected the dots in her complaint to explain

why the omission would render defendants' accurate statement about

510(k) clearance misleading, as required by the PSLRA.9

Second, we agree with the district court that Desktop

Metal's statement that failure to comply with regulations "would

have an adverse impact on [its] business and reputation" is best

understood as a "cautionary statement," which disclaims full

compliance rather than promises it, as Zhou contends. See Luongo,

Zhou argues in her reply brief that the specifics of FDA 9

regulations are irrelevant to this appeal. We disagree -- Zhou necessarily made the FDA's establishment registration regulations relevant by alleging that the violation of those regulations made statements about 510(k) clearance false or misleading. Although we do not need to resolve whether defendants violated those regulations, we at least need to understand how Zhou connects the establishment registration regulations to 510(k) clearance in order to conclude that she has sufficiently alleged why the website statement was rendered misleading by an omission of noncompliance.

- 27 -

, at *12. In full, Desktop Metal made the following

statement:

Compliance with regulations for medical devices and solutions is expensive and time-consuming, and failure to obtain or maintain approvals, clearances, or compliance could impact financial projections and/or subject us to penalties or liabilities.

Our Desktop Health products and services, and its healthcare provider customers and distributors, are and will be subject to extensive federal, state, local and foreign regulations, including, without limitation, regulations with respect to approvals and clearances for products, design, manufacturing and testing, labeling, marketing, sales, quality control, and privacy. Unless an exemption applies, we must obtain clearance or approval from the Food and Drug Administration (or comparable foreign regulatory body) before a medical device or solution can be marketed or sold; this process involves significant time, effort and expense. The healthcare market overall is highly regulated and subject to frequent and sudden change. Our failure to secure clearances or approvals or comply with regulations could have an adverse impact on our business and reputation and subject us to lost research and development costs, withdrawal of clearance/approval, operating restrictions, liabilities, fines, penalties and/or litigation.

(Emphasis added). The initial paragraph, emphasizing the cost and

time-burden of compliance, and the statement that the healthcare

market is "highly regulated and subject to frequent and sudden

change," clearly suggest compliance is difficult. As the United

States Court of Appeals for the Second Circuit aptly held,

- 28 - "acknowledgments of the complexity and numerosity of applicable

regulations . . . suggest[] caution (rather than confidence)

regarding the extent of [a company's] compliance." Singh v. Cigna

Corp.,

(2d Cir. 2019).

Zhou cites In re Gilead Sciences Securities Litigation

as an example of a court finding that allegations that a regulatory

compliance statement was misleading were sufficient to survive a

motion to dismiss, urging us to reach the same result here. No.

C 03-0100,

(N.D. Cal. Oct. 13, 2009). She

describes Gilead Sciences as "sustaining [a] 10(b) claim where [a]

company and its officers emphasized to the public that they

carefully complied with federal and state regulations," when they

knew they were not in compliance due to aggressive off-label

marketing of pharmaceutical products.10 This case is different,

however, because Zhou has not alleged that defendants ever stated

that they carefully complied with federal regulations.

10 It is not clear that Gilead Sciences stands for this proposition. In that case, the district court found that the complaint sufficiently alleged significant off-market sales of the pharmaceutical but did not address the challenged material misrepresentations or omissions because the defendants only asked for dismissal of the 10(b) claim against "non-speaking" defendants. The district court granted the motion because there were not sufficient allegations that those defendants substantially participated in the preparation of false statements. Gilead Scis.,

at *2-4. The case was on remand from the Ninth Circuit, which had limited its appellate review to the issue of loss causation and thus also did not address whether any statements were misleading. In re Gilead Scis. Sec. Litig.,

(9th Cir. 2008).

- 29 - Finally, we conclude that Zhou did not sufficiently

allege how Fulop's statement about "adding capacity to meet the

robust demand" for Flexcera was rendered misleading by failing to

disclose that EnvisionTEC was producing some Flexcera at the

unregistered Montreal facility. When making a voluntary

disclosure, a company that reveals one fact is not required to

"reveal all others that, too, would be interesting, market-wise";

instead, it is required only to reveal the facts necessary to make

the existing statement not "so incomplete as to mislead." Backman

v. Polaroid Corp.,

(1st Cir. 1990). The challenged

statement is not incomplete or misleading for failing to admit

that some Flexcera resin was produced at a non-compliant facility,

because the statement itself leaves no impression about

EnvisionTEC's regulatory compliance. See In re Copley Pharm.,

Inc. Sec. Litig., No. CIV.A. 94-11897,

, at *2 (D.

Mass. Mar. 16, 1995) (company's uncontroverted statements of fact

were not actionable based on its failure to disclose alleged

noncompliance with FDA regulations -- only statements of the

company's belief it was in "material compliance" with regulations

were actionable); cf. Serabian v. Amoskeag Bank Shares, Inc.,

(1st Cir. 1994) (reversing dismissal in

part where plaintiff alleged public statements by bank claiming

that its internal processes and policies for loan review were

- 30 - strong when in fact there were multiple internal process failures

related to its loan review).

Zhou argues that, taken together, defendants' statements

created the misleading impression that Desktop Metal fully

complied with all relevant regulations. But, as we previously

explained, we decide section 10(b) cases on a

statement-by-statement basis, considering the immediate context of

each statement. And under that analysis, Zhou’s complaint falls

short.

To be sure, Zhou plausibly alleged corporate

mismanagement and harm to defendants' customers. But "[n]ot all

claims of wrongdoing by a company make out a viable claim that the

company has committed securities fraud." Abiomed,

. This is such a case -- Zhou's allegations that Desktop Metal

violated certain FDA regulations do not make out a claim that

Desktop Metal defrauded its investors through material

misrepresentations or omissions.

2. Statements Related to the PCA 4000

Zhou next argues that defendants made misrepresentations

regarding the physical qualities of Flexcera that could be achieved

with the PCA 4000, EnvisionTEC's curing box. She focuses on three

statements on appeal. First, on May 17, 2021, Desktop Metal

published an investor presentation that described benefits of

Flexcera -- including that it is "~3x More resistant to fracture"

- 31 - and "~2x More resistant to water" -- on a slide that included a

picture of the PCA 4000. Second, in an interview with the

California Business Journal published in June 2021, Desktop Health

President Jafar represented that Flexcera could be used with

EnvisionTEC printers to produce eight sets of dentures in two

hours. Third, throughout portions of the class period, defendants

stated on the Desktop Metal website that Flexcera is "[c]ompatible

and validated for use with EnvisionTEC systems."

We agree with the district court that none of these

statements "suggest[] that the PCA 4000 was actually responsible

for achieving or optimizing Flexcera's touted qualities." Luongo,

, at *12. As to the first statement, Zhou has not

plausibly alleged any link between the qualities of Flexcera listed

on the slide and the unlabeled image of the PCA 4000 in the corner

of that slide (pictured with other EnvisionTEC products). Zhou

never explained why an investor would have attributed the qualities

listed there to the PCA 4000. Regarding the second statement,

about the speed at which EnvisionTEC printers can produce dentures

made with Flexcera, there is no plausible connection to the PCA

4000, which is a curing unit, not a printer.

We also find Zhou did not plausibly allege that the third

statement -- that Flexcera was compatible with EnvisionTEC

systems -- was false. Zhou does not dispute that Flexcera resins

were compatible with EnvisionTEC printers or EnvisionTEC curing

- 32 - units besides the PCA 4000. The complaint does not allege, for

example, that the EnvisionTEC branded Otoflash -- the only curing

unit mentioned in defendants' manufacturing instructions for

Flexcera -- was incompatible with Flexcera. Nor does the complaint

allege that Desktop Metal claimed Flexcera was compatible with all

its products. Thus, there is no plausible claim that the general

statement that Flexcera was compatible with EnvisionTEC systems

was false.

Zhou argues that the challenged statements were

nevertheless "misleading for the very fact that they failed to

mention the Company's undisclosed sales practice of pushing the

untested PCA 4000 on customers for curing Flexcera resin." We

disagree. To render a statement misleading, the omission must be

within the "scope of the disclosure." Hill,

. Zhou

makes no argument that defendants' questionable sales strategy

pushing the PCA 4000 was within the scope of the above statements.

Nor could she make such an argument, given that none of those

statements link Flexcera's qualities to the PCA 4000. In Hill, we

found that a company's statement that non-reimbursement posed a

risk to the company’s revenue projections was not misleading for

failing to disclose its allegedly risky reimbursement strategy,

because that strategy was "plainly beyond the scope of the

disclosure."

. Here, the undisclosed sales strategy

is far less related to the challenged statements.

- 33 - The only case that Zhou cites on this point does not

help her. See In re Plantronics, Inc. Sec. Litig., No.

19-CV-07481,

(N.D. Cal. Aug. 17, 2022). In that

case, the district court concluded that the plaintiff sufficiently

alleged that certain statements were misleading because they

"attribut[ed] positive revenue results to organic consumer demand

and other factors" while omitting any mention of an unsustainable

sales practice. Id. at *13; see also id. at *2 ("The undisclosed

sales practice resulted in essentially borrowing sales or revenues

from future quarters and was, therefore, unsustainable."). That

case would be analogous only if Zhou had pointed to a statement

that attributed the positive qualities of Flexcera to the use of

the PCA 4000.

Zhou also cites a laundry list of statements defendants

made about the qualities of Flexcera generally. Those statements

refer to Flexcera's superior aesthetics, strength, and

flexibility. None of those statements, however, have any

connection to the PCA 4000. Thus, we agree with the district court

that Zhou failed to state a securities fraud claim based on those

statements because she "[did] not dispute that dentures produced

with Flexcera resin were generally capable of achieving the quality

specifications Defendants advertised." Luongo,

,

at *12. On appeal, Zhou takes issue with the district court's

conclusion, but the only allegation that Zhou cites to contradict

- 34 - this conclusion is that Flexcera cured with the PCA 4000 turned

out "gummy." That is not enough to show that general statements

about Flexcera's qualities were false or misleading.

Because we conclude that Zhou failed to allege that any

of the challenged statements were either materially false or

misleading, we do not reach the issue of scienter. And because

Zhou did not state any claims under section 10(b), her derivative

section 20(a) claims also fail. See Abiomed,

.

IV. CONCLUSION

For all these reasons, we affirm the dismissal of Zhou's

complaint.

- 35 -