The opinion of the court was delivered by: Judge Joan B. Gottschall
MEMORANDUM OPINION AND ORDER
Plaintiffs, Premier Capital Management, LLC ("Premier"), TMB, LLC ("TMB") and Xen Investors, LLC ("Xen") (collectively "Plaintiffs"), have filed a twenty-two count third amended complaint claiming violations of federal and state securities laws, as well as several state common laws. Plaintiffs allege, among other things, that the officers and directors of Xentex Technologies, Inc. ("Xentex") violated the various laws when they induced Plaintiffs to invest in Xentex. These officers and directors were Larry Cohen ("Cohen"), Wan Hee Kim ("Kim"), Michael Turcotte ("Turcotte"), and Brian Flanagan ("Flanagan"). Plaintiffs also allege that Northview Bank & Trust ("Northview"), Xentex's bank, and its president, Blair Robinson ("Robinson"), aided and abetted that inducement by providing an environment in which Jeffrey Batio ("Batio"), the founder and Chief Executive Officer ("CEO") of Xentex, could misappropriate corporate funds. The various defendants have filed motions for summary judgment.*fn2 Before the court are two motions: (1) Flanagan's motion for summary judgment on Counts VII-XI; and (2) motion for summary judgment on Counts I-VI, XII-XVI, and XIX-XX filed by defendants Cohen, Kim, and Turcotte (collectively "the Cohen Defendants"). Because Plaintiffs' claims against the four defendants are almost identical, and because the defendants raise essentially the same legal arguments, the court is ruling on both motions together. For the reasons stated below, the court grants both parties' motions in part and denies them both in part.
A. The Parties And Relevant Persons
Xentex was a Delaware corporation that, around the year 2000, was developing and launching a laptop computer with a folding screen known as the Voyager. Premier is a registered investment advisor, registered as a Delaware limited liability company. Xen is a Virginia limited liability company formed for the purpose of making investments in Xentex. TMB is a Virginia limited liability company formed for the sole purpose of making an investment in Xentex.
Cohen was a member of the Board of Directors of Xentex (the "Board"). Kim was also a member of the Board, as well as Chairman of the Executive Committee of Xentex, and the primary liaison for product development and manufacturing efforts with Xentex's business partners, including Korean Data Systems, Ltd. ("KDS"). Turcotte was Vice President of Accounting and Control and Chief Financial Officer of Xentex. Flanagan's company, Mercury Partners 135 XT, Inc., made a $500,000 loan to Xentex, the terms of which allowed the company to designate a person to be elected to the Board. Flanagan was elected to the Board and attended his first meeting in October 2000. From March to October 2000 and then again from around March 2001, Batio served as CEO of Xentex. From October 2000 to around March 2001, Batio served as Chief Strategic Officer and Joe Negler ("Negler") joined Xentex as CEO. Douglas Tucker ("Tucker") is an attorney who was President of Xentex from March 2000 to October 2000, Executive Vice President of Xentex from October 2000 to January 2002, and a member of the Board during his entire tenure.
B. The Transactions At Issue
Xentex, through Batio and Tucker, first presented Plaintiffs with an opportunity to invest at a meeting held in Virginia on November 1, 2000. During that meeting, Plaintiffs received an Information Statement dated November 1, 2000 (the "Information Statement"), which contained numerous representations relating to Xentex, the Voyager computer, Xentex's plans for launching the Voyager into the market, and the ability of Xentex's supplier, KDS, to finance, manufacture and service necessary hardware. Plaintiffs communicated -- orally and in writing -- with various representatives of Xentex after this date, including at a multi-day meeting at the Xentex facility in California. Xen made a series of stock purchases between November 2000 and February 2001, purchasing a total of 400,000 shares of common stock in Xentex for $1.2 million. Subsequently, on June 4, 2001, TMB loaned Xentex $650,000 in exchange for a promissory note that was repayable in stock.
Plaintiffs allege that the representations made in the Information Statement, the oral representations made at the November 1st meeting, and various other representations made in connection with the stock purchases and execution of the promissory note were false. Plaintiffs claim that the defendants hid Xentex's deteriorating financial condition from Plaintiffs, thereby obscuring the true value of Plaintiffs' investment.
A. Summary Judgment Legal Standard
Summary judgment is appropriate when the record reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). It is not appropriate if a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In seeking a grant of summary judgment the moving party must identify "those portions of 'the pleadings, depositions, answers to the interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56(c)). This initial burden may be satisfied by presenting specific evidence on a particular issue or by pointing out "an absence of evidence to support the non-moving party's case." Id. at 325.
In response, the non-moving party cannot rest on the pleadings, but must designate specific material facts showing that there is a genuine issue for trial.*fn4 Fed. R. Civ. P. 56(e); Celotex Corp., 477 U.S. at 324. "The applicable substantive law will dictate which facts are material. Only disputes that could affect the outcome of the suit under governing law will properly preclude the entry of summary judgment." McGinn v. Burlington N.R.R. Co., 102 F.3d 295, 298 (7th Cir. 1996) (internal citation omitted). The non-moving party must make a "sufficient showing of evidence for each essential element of its case on which it bears the burden at trial." Salas v. Wis. Dep't of Corrs., 493 F.3d 913, 921 (7th Cir. 2007) (citing Celotex, 477 U.S. at 322-23). The court must view the record and any inferences to be drawn from it in the light most favorable to the opposing party. Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir. 1991).
B. Claims Under The Securities Act of 1933
The Securities Act of 1933 (the "1933 Act") requires that investors receive certain information on securities being offered for public sale and prohibits misrepresentations in the sale of securities. Section 12(a)(2) of the 1933 Act imposes liability on those who offer or sell a security by means of a sales prospectus that "includes an untrue statement of material fact or omits to state a material fact . . . ." See 15 U.S.C. § 77l(a)(2). Under § 15 of the 1933 Act, liability flows to anyone who "controls any person liable under section . . . 12," unless that control person can establish an absence of negligence. See id. § 77o.
Plaintiffs assert claims under § 15 of the 1933 Act, seeking to hold liable Xentex's control persons for Xentex's alleged violation of § 77l by use of a prospectus and other communications containing false statements and misleading omissions. Specifically, Plaintiffs allege that Xentex provided misleading financial disclosures, misrepresented the involvement and commitment of KDS, failed to disclose known misappropriations of funds, and provided inaccurate information regarding the launch date of the product. They argue that certain defendants are control persons within the meaning of § 77o and are therefore derivatively liable for Xentex's misrepresentations and omissions.
In Count VII, Plaintiffs allege that Flanagan, as a director of Xentex, violated § 77o. Flanagan argues that: (1) he is not a control person; (2) if he is a control person, he has the defense of good faith; and (3) even if he does not have a defense, Xentex did not commit a primary violation of the 1933 Act for which Flanagan can be derivatively liable. Flanagan therefore asserts that he is "entitled to judgment as a matter of law on [Xen's] federal . . . securities law claims." Mem. in Supp. of Flanagan's Mot. for Summ. J. at 5.
In Count I, Plaintiffs allege that Turcotte, as Chief Financial Officer and Vice President of Accounting and Control of Xentex, violated § 77o. In Count XII, they allege that Kim, as a director and officer of Xentex, violated § 77o. (Plaintiffs do not allege that Cohen violated the 1933 Act.) The Cohen Defendants argue (1) Kim and Turcotte are not control persons; (2) even if they are, they have the defense of good faith; (3) even if they do not have a defense, Plaintiffs cannot maintain a cause of action because the sale of Xentex stock to Xen was not a public offering; (4) Xentex did not commit a primary violation of the 1933 Act so there can be no derivative liability; and (5) Xen has no losses for which Kim and Turcotte can be liable.
Before it considers the evidence presented on the § 77o claims, the court will address the more expansive arguments that: (1) the sales of stock to Plaintiffs were not covered by the 1933 Act; and (2) Plaintiffs' claims are barred by a one-year statute of limitations.
1. Whether The Transactions Are Covered By The 1933 Act
a. Whether The Stock Sales Were Made Pursuant To Regulation D
Under the 1933 Act, any offer or sale of securities must be either registered with the U.S. Securities and Exchange Commission ("SEC") or quality for an exemption. Registration of securities ensures that companies file essential facts with the SEC, which then makes these facts public. However, the SEC exempts small offerings from the registration process "to foster capital formation by lowering the cost of offering securities to the public." See SEC, The Laws That Govern the Securities Industry (2007), http://www.sec.gov/about/laws.shtml.
Flanagan and the Cohen Defendants argue that the Xen transaction was exempt from registration as a private placement made pursuant to Regulation D, a "safe harbor" regulatory provision under the 1933 Act. See 15 U.S.C. § 77d(2) (exempting from registration "transactions by an issuer not involving any public offering"); 17 C.F.R. § 230.506 (providing specific rules under which an issuer can ensure a transaction is not a public offering). Therefore, they argue, the transaction is exempt from the requirements of § 12(a)(2) of the 1933 Act, upon which Plaintiffs claims rest, because that section requires that the false statements or omissions to have been made in connection with a "prospectus." And, as this court explained in a previous order, only documents related to public offerings involve a "prospectus," which means that "causes of action brought under [the 1933 Act], where the transaction at issue was a private placement rather than a public offering, are subject to dismissal." See Premier Capital Mgmt., LLC v. Cohen, 02 C 5368, 2005 WL 21960357, *10 (N.D. Ill. Aug. 15, 2005) (citing Gustafson v. Alloyd Co., 513 U.S. 561 (1995)). Flanagan explicitly invokes Regulation D, whereas the Cohen Defendants frame their arguments in a more general "public offering" context, which includes a Regulation D component. The court will address Flanagan's specific argument first.
The burden of proof for establishing that Regulation D applies rests with the defendants. See SEC v. Ralston-Purina Co., 346 U.S. 119, 126 (1953) (finding the "imposition of the burden of proof on an issuer who would plead the [private placement] exemption" to be "fair and reasonable" given the "broadly remedial purposes of federal securities regulation"); SEC v. Van Horn, 371 F.2d 181, 187 (7th Cir. 1966) (same).
The specific section of Regulation D upon which Flanagan relies is Rule 506. Rule 506 provides, in relevant part, that "[o]ffers and sales of securities by an issuer that satisfy [the general and specific conditions listed in paragraph (b) of this rule] shall be deemed to be transactions not involving any public offering . . . ." See 17 C.F.R. § 230.506(a). The "general conditions" are those conditions contained in Rule 501, which provides definitions of terms used in Regulation D, and in Rule 502. Id. § 230.506(b). In turn, Rule 502 provides, in part, that:
All sales that are part of the same Regulation D offering must meet all of the terms and conditions of Regulation D. Offers and sales that are made more than six months before the start of a Regulation D offering or are made more than six months after completion of a Regulation D offering will not be considered part of that Regulation D offering, so long as during those six month periods there are no offers or sales of securities by or for the issuer that are of the same or a similar class as those offered or sold under Regulation D . . . .
Id. § 230.502(a) (commonly known as the "incorporation doctrine). Rule 502 also requires certain information to be disclosed to non-accredited investors, limits the manner of offering, and limits the re-saleability of securities sold. Id. § 230.502(b)-(d). The "specific conditions" to which Rule 506 refers limit the number of purchasers to "no more than 35" and require that all non-accredited investors*fn5 have "knowledge and experience in financial and business matters [so] that he is capable of evaluating the merits and risks of the prospective investment." Id. §§ 230.506(b)(2)(i)-(ii). Robinson has the burden of proving that the offering meets these requirements.
Flanagan (who incorporates the reply arguments of the Cohen Defendants) argues that the only issue is whether Plaintiffs purchased stock pursuant to a private placement and that other investors' purchases and other sales by Xentex are irrelevant to this analysis. However, the very purpose of the incorporation doctrine is to require a broad analysis of the company's stock transactions to ensure that, cumulatively, they do not violate Rule 506. Additionally, Flanagan argues that Plaintiffs do not raise "even a scintilla of evidence raising a genuine issue for trial regarding the fact that its own purchase of Xentex stock was pursuant to a private placement, not a public offering." Cohen Defs. Reply at 4. However, the burden of proof that a Regulation D exemption applies lies with Flanagan and, until he establishes an exemption applies, Plaintiffs have no need to rebut. Thus, Flanagan's evidence is the first order of concern.
Flanagan relies exclusively on the evidence provided by Tucker, who was President or Executive Vice President of Xentex around the time of the sales to Xen and who was present during the meeting in November 2000. However, Tucker's evidence is insufficient to establish a prima facie exemption under Regulation D because he does not address actual sales of stock. For example, in support of his argument that "there were no other offers . . . that could be integrated with the offering to Xen Investors," Flanagan cites to Tucker's deposition. Mem. of Law in Supp. of Flanagan Mot. for Summ. J. at 14 (citing to Flanagan Statement of Facts ¶ 93). However, Tucker says nothing specific in regard to other stock sales in the cited portions. Rather, he states, in conclusory terms, that the stock sale to Xen Investors "was not an offering" and that "[Xentex] never -- never before that date nor subsequent to that date -- discussed" with any other party the terms offered to Plaintiffs. See Flanagan Statement of Facts, Tab 14, Dep. of Tucker at 322:22-325:9 (emphasis added). Other evidence offered from Tucker is similarly inadequate to establish an exemption applies. For example, Tucker states that the terms were different from those in "previous private placement memoranda," without addressing subsequent memoranda, and that "Xentex did not solicit other investors to purchase stock on the same terms offered to Xen Investors," without addressing actual sales. Id., Tab 2, Tucker Aff. ¶ 10 (emphasis added). The most favorable inference from these statements may be that if Xentex did not discuss such sales it did not make them; however, the court is obligated to draw reasonable inferences in favor of the non-moving party, and in so doing, it finds that Flanagan has not provided sufficient information on actual sales of stock sufficient to meet his burden.
Rule 502 requires there to be no "offers or sales of securities" (emphasis added) within the relevant six-month time frame. To conflate the two terms would be to render one of them surplusage, which this court will not do. See TRW, Inc. v. Andrews, 534 U.S. 19, 31 (2001) ("It is a cardinal principle of statutory construction that a statute ought, on the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant." (internal citation and quotation marks omitted)); see also Nat'l Ass'n of Home Builders v. Defenders of Wildlife, 127 S.Ct. 2518, 2535 (2007) (refusing to interpret an agency regulation in a way that would render part of the text surplusage). In addition, other court's holdings support such an interpretation of the regulation. See, e.g., Wright v. Nat'l Warranty Co., 953 F.2d 256, 260 (6th Cir. 1992) (finding an exemption under Regulation D where defendants' lawyer's affidavit "stated that the technical requirements found in 230.501 [through] 503 were satisfied [and] states that Form D*fn6 was duly filed with the SEC . . . ."); Fay L. Roth Revocable Trust v. UBS Painewebber, Inc., 323 F. Supp. 2d 1279, 1283 (S.D. Fla. 2004) (finding no material dispute that the offering complied with Regulation D where the defendants' statement of facts stated that "the offering and issuance of interests in the Fund was made pursuant to Rule 506 of Regulation D"). The burden is on Flanagan -- as the movant and proponent of the exemption -- to prove Regulation D applies and he fails to address a key element.*fn7 Therefore, Flanagan has failed to prove that the exemption applies and summary judgment on this ground is denied. The Cohen Defendants argue that the Information Statement contained explicit language stating that the stock was being sold pursuant to Regulation D, but they -- like Flanagan -- fail to provide evidence sufficient to sustain a Regulation D affirmative defense.
The court now turns to the flip-side of the Regulation D argument, namely the Cohen Defendants' contention that Plaintiffs cannot prove the "public offering" element of their prima facie case. As the court observed in a previous order, the case law supports the Cohen Defendants' argument that Plaintiffs would lack standing to assert a § 77l(a)(2) claim if Xen did not purchase stock in a public offering. See Premier Capital Mgmt., LLC, 2005 WL 21960357 at *10 (citing to Gustafson); see also Yung v. Lee, 432 F.3d 142, 149 (2d Cir. 2005) ("Gustafson's definition of a prospectus as 'a document that describes a public offering of securities' compels the conclusion that a Section 12(a)(2) action cannot be maintained by a plaintiff who acquires securities through a private transaction, whether primary or secondary." (citing to Gustafson, 513 U.S. at 584)).
The Cohen Defendants argue that the evidence shows that Xentex "took no money from anyone who was not an accredited investor," "never permitted anyone who did not qualify for an exemption to purchase stock," and closed the last of its four "financing rounds" more than a year before Xen purchased stock. Cohen Defs.' Mem. in Supp. of Mot. for Summ. J. at 9-10. In response, Plaintiffs have presented undisputed evidence that Xentex sold to non-accredited investors, several of whom purchased stock around the same time as Xen, although the parties dispute whether these sales fall within the scope of the incorporation doctrine. See Pls.' Statement of Facts (Cohen Defs.) ¶ 42 (listing eight people who bought Xentex stock). In addition, close inspection of the record shows that the deposition testimony relied on by the Cohen Defendants is much more tentative about whether the sales were part of a public offering than their brief suggests. See, e.g., Cohen Defs.' Statement of Facts ¶¶ 58-59 (deposition of Tucker where he says he "probably talked about [whether or not Xentex's stock sales were public offerings or private placements] with [Xentex's counsel] and other people at Xentex" and agrees that he and Xentex's counsel "took efforts to ensure that there were no public offerings" (emphasis added)). A reasonable jury, considering the tentative statements and Plaintiffs' evidence of other sales, could reject the Cohen Defendants' conclusory argument that Xen's purchase was a private placement and find that it was part of a public offering. Thus, Plaintiffs survive summary judgment on this issue.
2. Statute of Limitations Bar*fn8
Flanagan argues that Plaintiffs' claims are barred by the statute of limitations because, under the 1933 Act, no § 77l(a)(2) claim may be maintained "unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence . . . ." 15 U.S.C. § 77m. He argues that Plaintiffs knew or could have found out about the alleged fraudulent statements and omissions more than a year before they filed suit (on March 20, 2002), namely when: (1) Xentex delivered documents to Plaintiffs' attorney around November 2000; (2) Xentex failed to produce computers according to schedule in early 2001; (3) Xentex, at the beginning of 2001, sent a letter to Plaintiffs telling them of delays and design revisions; and/or (4) Plaintiffs, around March 15, 2001, received a memorandum that conflicted with representations made by Batio and Tucker.
Plaintiffs have raised a triable issue of material fact as to whether the claims are barred. Specifically, they dispute that the documents were actually sent to their attorney and that they were put on notice of fraudulent statements by events and documents relating to manufacturing delays, and allege that they were reassured that everything was alright by Xentex. See, e.g., Pls.' Statement of Facts (Flanagan) ¶ 27 (citing deposition testimony from Plaintiffs' lawyer stating he did not recall seeing the documents and from the person who allegedly sent the documents saying she did not recall sending them); id. ¶ 44 (citing deposition testimony where Plaintiffs' representative states the January 2001 letter did not contradict earlier statements). Therefore, summary judgment on this ground is denied.
3. Plaintiffs' Control Person Liability Claims
Plaintiffs allege that Flanagan, Kim, and Turcotte are liable as control persons for Xentex's misstatements and omissions in its prospectus pursuant to § 77o of the 1933 Act, which states:
Every person who, by or through stock ownership, agency, or otherwise, or who pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under sections 77k or 77l of this title, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlled person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist.
15 U.S.C. § 77o. Flanagan and the Cohen Defendants argue that they do not meet the control person test and so cannot be held liable. The Seventh Circuit has established a two-prong test to determine control person liability:*fn9 "First, the 'control person' needs to have actually exercised general control over the operations of the wrongdoer, and second, the control person must have had the power or ability -- even if not exercised -- to control the specific transaction or activity that is alleged to give rise to liability." Donohoe v. Consol. Operating & Prod. Corp., 30 F.3d 907, 911-12 (7th Cir. 1994) (citing Harrison v. Dean Witter Reynolds, Inc., 974 F.2d 873, 880-81 (7th Cir. 1992)); Premier Capital Mgmt., 2005 WL 21960357 at *11 (internal citations omitted).
a. Control Person Status: Flanagan, Kim, and Turcotte
In its order denying Flanagan's motion to dismiss this count, the court noted that "[s]imply relying on Flanagan's status as a member of the Board of Directors is insufficient . . . ." Premier Capital Mgmt., LLC, 2005 WL 21960357 at *11 (observing that Plaintiffs did "a bit more" by alleging active participation in and control of decisions of the Board, helping and/or reviewing the Information Statement, and holding a security interest in Xentex's assets). The issue before the court now, however, is whether Plaintiffs have raised sufficient questions of disputed fact to survive for summary judgment on their claims under § 77o.
First, Plaintiffs must prove that Flanagan exercised general control over the operations of Xentex. The parties do not dispute that: (1) Flanagan owned just ten shares of Xentex stock; (2) he attended only two Board meetings, one in October 2000 and one (by telephone) in May 2001; (3) the majority shareholder had authority to remove any or all Directors, except that Flanagan could not be removed until his $500,000 loan was paid off; (4) the JB Family Trust*fn10 was the majority shareholder; (5) Xentex formed an Executive Committee (consisting of Batio, Tucker and Kim) in May 2000 to make decisions for the Board; (6) Flanagan was never a member of the Executive Committee; (7) the Executive Committee had the same authority as the Board to remove officers, fill office vacancies, and control the CEO, President, and Executive Vice President. Despite these undisputed facts, which certainly seem to suggest that Flanagan's role in Xentex was not a major one, Plaintiffs posit five reasons why Flanagan did, in fact, exercise general control: (1) he was a director; (2) he was not a passive director, rather he was active and spoke out and voted for and against resolutions; (3) he exercised control over some board decisions, including the rejection of the original loan terms proposed by TMB; (4) he played an instrumental role in replacing Batio as the CEO of Xentex; (5) he made a $500,000 loan to Xentex. Flanagan does not dispute this, but rather argues that, even cumulatively, these actions are insufficient to show control person status.
The dispute essentially comes down to whether Flanagan had more influence than it would appear he should have had as a minority shareholder and non-member of the Executive Board. Flanagan is correct that neither his status as director nor his status as creditor is alone sufficient to establish he was a control person. See Schlifke v. Seafirst Corp., 866 F.2d 935, 949 (7th Cir. 1989) (concluding that a bank that lent money to a corporation did not have control over the corporation's activities); Premier Capital Mgmt., LLC, 2005 WL 21960357 at *11. However, the intersection of his status as a creditor and a board member allows an inference that he could have exerted an influence over Xentex that was greater than a person who occupied just one of those statuses. See, e.g., Harrison, 79 F.3d at 614 ("We have long recognized that some indirect means of discipline or influence, although short of actual direction, is sufficient to hold a 'control person' liable."). Additionally, by virtue of his $500,000 loan to Xentex, Flanagan was the only member of the Board who could not be dismissed at the whim of the majority stockholder. His "tenured" status could have provided him with more influence over both the majority shareholder and other Board members. Thus, viewing the facts in the light most favorable to Plaintiffs, the court concludes that a genuine factual dispute exists as to the weight of Flanagan's influence on day-to-day decisions and the general control of Xentex.
Plaintiffs also need to show that Flanagan had the "power or ability . . . to control the specific transaction or activity that is alleged to give rise to liability," namely the misrepresentations and omissions. See Donohoe, 30 F.3d at 912. Flanagan argues that he was simply a member of the Board of Directors who had no role in creating the Information Statement and was not present when any fraudulent statements were made to Plaintiffs. Plaintiffs argue that, even if this is true (which they dispute), Flanagan had the ability to review the documents and control the transactions, which makes him liable.*fn11 The parties do not dispute that Flanagan did not personally attend the November 2000 meeting and did not personally present Plaintiffs with an offer to invest. Pls.' Resp. to Flanagan Statement of Facts ¶ 65.
However, Flanagan's role in the creation of the Information Statement is disputed as is his ability to correct or supplement information previously given to Plaintiffs. Specifically, there are factual disputes about whether Flanagan was involved as part of "management" in crafting the content of the Information Statement, whether he was on notice of a potential disclosure problem given that he knew before November 1, 2000 that Xentex was meeting with potential investors, and whether he had an obligation in January 2001 to be more actively involved in the solicitation statements given what he was told about production delays, the lack of "Plan B" financing options, and Executive Committee approval of funding deals up to $7 million. Flanagan Am. Resp. to Pls.' Statement of Facts ¶¶ 15, 17, 19. ...